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:
May 2024 CPI Estimate
Tomorrow at 8:30 am ET we will get the long-awaited May CPI. Normally, CPI is the most important print in any month but this month it will be even more important because it goes out on the 2nd day of the Fed meeting, meaning it could determine the tone of the Fed meeting.
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.
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Thank you. Always great to see your accurate estimates