May 2024 PCE Estimate
In Q1 2024 CPI was higher than expected. Then in Apr it came in line, and in May it came notably cooler than expected.
May CPI was even a tad cooler than my below-consensus estimates:
PPI has been rather volatile YTD. The latest May read showed MoM deflation for headline PPI. Before May PPI was mostly higher than expected initially, although Mar was revised much lower and is now negative for both headline (-0.06% MoM) and core PPI (-0.01% MoM). Headline PPI had MoM deflation in 2 of the last 3 months.
Unlike CPI and PPI which mostly came higher than expected in the first 4 months of 2024, PCE mostly came in line with expectations with even 2 beats for core PCE in Feb and Apr.
Both CPI and PPI came in cooler than expected in May. What does that mean for the May PCE?
Maybe even more important could be what will May PCE mean for the Fed?
My May PCE estimates are…
Headline PCE
0% MoM and +2.6% YoY
Core PCE
+0.1% MoM and +2.6% YoY
My unrounded estimates are:
If my estimates are correct, headline PCE would already be where the Fed official think it will end this year, while core PCE would even be 0.2 pp below where the Fed thinks it be at the end of 2024. And there will be 7 more months to go after May.
Still, May PCE alone is unlikely to give the Fed enough confidence that inflation is sustainably returning back to 2%. For that to happen, they will need to see more favorable months. Therefore, their first cut will depend on the PCE forward trajectory.
PCE forward trajectory is part of Marko’s Fed Report which, among other things, contains:
Analysis of what the Fed has done so far
Comprehensive analysis of the economy giving the answer to which landing we are in
Analysis of monetary policy lags
PCE forward trajectory (headline and core until the end of 2024)
When will the Fed likely start cutting rates and why
Marko’s Fed Report is part of premium Arkomina Research.
As a subscriber to this article you get a Special Offer of up to -60% off on premium research.
For more information about Arkomina Research and how to subscribe using Special Offer click this link here.
DISCLAIMER
These articles are for discussion and educational purposes only.
Past performance is no guarantee of future results.
Although specific securities and economic forecasts may be discussed in articles, you should NOT construe any comment as a call to buy or sell any security, or as a legal, tax, investment, financial or other advice. Consult your own advisors if you require such advice.
ANY USE OF THESE ARTICLES IS AT YOUR OWN RISK AND LIABILITY. Neither Arkomina Consulting Ltd nor Marko Bjegovic as its director or any employee, accepts any liability whatsoever for any direct, indirect, consequential, moral, incidental, collateral or special damages or losses of any kind.
Thank you. Always great to see your accurate estimates