The Bureau of Economic Analysis will publish its August reading of the Federal Reserve’s preferred measure of U.S. inflation Friday as markets grapple with the likelihood of a final rate hike between now and the end of the year even as core price pressures continue to recede.
Markets will likely key on the BEA’s core PCE price index, which the Fed considers to be a more accurate representation of consumer price pressures, as well as its estimate of personal income and spending gains in the what could be the final on-time data release for the next several weeks, should the expected government shutdown begin this weekend in Washington.
Analysts see the August core reading ticking modestly lower from last month — the lowest in nearly to years –to a year-on-year gain of 3.9%. The monthly reading is forecast to rise by 0.2%, matching the pace of gains in June and July and modestly lower than the 0.3% in August.
The Bureau of Labor Statistics reported earlier this month that its headline consumer price index ticked higher in August, to 3.7%, while core prices, which strip out volatile food and energy costs, eased to 4.3%.
Data on August consumer spending and personal incomes will also be published by the BEA, with economists looking for 0.4% gains in each, down from the 0.6% advance in July.
The CME Group’s FedWatch suggests only a 17.3% chance of a quarter point rate hike in November, with the odds of a similar increase in December pegged at 30.8%.
“Real consumers’ spending is now coming
under pressure, after a strong first half. Most of the excess
savings accumulated during Covid have been spent, and
the remainder is mostly held by high-income households,
who are less likely to spend it,” said Ian Shepherdson of Pantheon Macroeconomics.
.”A sustained period of sluggish growth in consumption is now a decent bet, unless people start to run down non-Covid savings, take on extra debt, or see a sudden increase in their incomes. The last seems unlikely; higher gas prices
meant that real after-tax incomes fell in July for the first
time since the spike in energy prices during the invasion of
Ukraine.”
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