US Core PCE Bank Forecast: Inflation To Remain Sticky

The Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (PCE), will be released by the US Bureau of Economic Analysis (BEA) on Friday, May 26 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of four major banks.

Core PCE is expected to stay at 4.6% year-on-year while rising 0.3% in April (MoM). The headline is seen increasing by 0.4% in April, and a slowdown in the annual rate from 4.2% to 3.9%. 

TDS

“We expect core PCE inflation to tick a tenth higher to 0.4% MoM in April, matching the core CPI’s MoM gain though there’s a non-negligible chance it prints 0.3% (our unrounded forecast is 0.37%). The YoY rate likely rose a tenth to 4.7%.”

NBF

“The annual core PCE deflator may have remained unchanged at 4.6% in April.” 

CIBC

“With the PCE price index weighting medical care services (a disinflationary force) higher than the CPI basket, but housing (an inflationary force) lower, the monthly seasonally adjusted increase in core PCE should be at least a tick weaker than ex-food/energy CPI. However, that would leave the annual rate only one tick lower than in the previous month, at 4.5%.”

Citi

“Core PCE inflation should remain persistently strong in April, with expectations for a 0.38% MoM increase based on CPI and PPI inflation elements. While this is a similar increase to 0.41% MoM core PCI, the key core non-shelter services price components may rise by a stronger 0.42% MoM in PCE compared to 0.11% in CPI, highlighting the divergence between CPI and PCE inflation. Our forecasts would imply core PCE inflation rising slightly to 4.7% YoY, although this will also be sensitive to any revisions to PCE data in the second release of Q1 GDP.”

About the Core Personal Consumption Expenditures Price Index

The Core Personal Consumption Expenditures are a crucial indicator of inflation. Therefore a higher-than-expected reading is bullish for the US Dollar and vice versa. The PCE, published by the US Bureau of Economic Analysis, estimates the average amount of money consumers spend over a month. The core reading excludes seasonal, volatile products such as food and energy to calculate price behavior accurately.