By Chuck Mikolajczak
NEW YORK (Reuters) -The U.S. Commerce Department said on Friday its Personal Consumption Expenditures Price Index (PCE) rose 0.2% in July, versus the unrevised 0.3% rise in June and matched the estimate of economists polled by Reuters.
In the 12 months through July, PCE inflation increased 2.6% after climbing 2.6% in June. Stripping out the volatile food and energy components, the so-called core PCE Price Index increased 0.3% last month. That followed a 0.3% rise in the core inflation in June.
In the 12 months through July, core inflation advanced 2.9% after rising 2.8% in June. The Federal Reserve tracks the PCE price measures for its 2% inflation target.
MARKET REACTION:
STOCKS: S&P 500 emini futures slightly pared declines and were down 17 points, or 0.26%
BONDS: U.S. Treasury yields briefly pared gains and the 10-year yield was last up 2.3 basis points at 4.23% and the two-year yield edged up 0.2 basis point to 3.637%
FOREX: The dollar index held gains and was up 0.21% to 98.09
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“After two months in the dumps, spending on durable goods jumped in July, driven by autos. Real incomes excluding transfer receipts—a key recession indicator—showed a healthy advance in July. Peak tariff uncertainty in May and June weighed on jobs, spending, and incomes. Hopefully the relief in July can continue without too much permanent damage being done.”
MICHAEL LORIZIO, HEAD OF US RATES TRADING, MANULIFE INVESTMENT MANAGEMENT, BOSTON:
“PCE was basically in line with expectations. Between CPI and PPI and some smaller inputs from other economic indicators, the street and the more high-profile economists have gotten really good at being able to predict where core PCE should be coming in, so the actual release has become a bit less of an event just because of those other inputs that we see ahead of time.”
“You can check this off as one more risk to potentially derailing a cut in September. The inflation part of it, at least in this measure, is not going to do anything to reduce odds of a cut in September.”
CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, NORTHLIGHT ASSET MANAGEMENT, CHARLOTTE, NC (via email):
“Inflation is increasing ever so slightly, but right in line with forecasts and this morning’s PCE data should only increase the probability of a Fed rate cut next month. There are another two important inflation reports before next month’s meeting – PPI and CPI on 9/10-9/11 – but as long as those reports don’t show a huge spike in inflation, the Fed will be almost guaranteed to cut interest rates by 0.25% on 9/17.”
ART HOGAN, CHIEF MARKET STRATEGIST FOR B. RILEY WEALTH, BOSTON (via email):
“You have to love it when a plan comes together. Today’s numbers on both the personal consumption, expenditure, and income, and spending, were a right down the middle of the fairway. This leaves the door wide open for the Fed to cut rates in September and likely again in October and in December. The treasury yield curve is responding appropriately with rates coming down both on the two year and the 10 year.”
(Compiled by the Global Finance & Markets Breaking News team)
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