Sep 2024 PCE Estimate
PCE is the Fed’s preferred inflation gauge. After +0.1 pp higher-than-expected CPI in Sep, especially core, fears that inflation might be increasing have gone up. We haven’t had a CPI miss since surprisingly high reads in Q1 this year.
Unlike CPI, PPI was actually better than expected in Sep. PPI was even more volatile YTD than CPI. It managed to fully beat expectations in only 2 of the last 9 months (May and Jul). It also beat expectations for headline PPI (but missed for core) in Mar and Sep (but core was in line).
Unlike CPI and PPI which were more volatile and mostly higher than expected in the first months of 2024, PCE mostly came in line with expectations YTD with even 3 beats for core PCE in Feb, Apr and Aug but also one miss for core in Jun.
I started publishing my PCE estimates in Mar this year (included PCE forecast for Feb) and so far my estimates have a perfect average error of 0 bps for headline PCE.
For core PCE, my average error is near perfect, only -1 bps.
Here are links to my prior PCE estimates:
My Sep PCE inflation estimates are…
Headline PCE
+0.1% MoM and +2.0% YoY
Core PCE
+0.2% MoM and +2.6% YoY
My unrounded estimates are:
If my estimates are correct, 2% inflation target might be hit in Sep already. This would be a welcome development after headline PCE remained above target for 3.5 years. That should give more reason to the Fed to continue with rate cuts. At the same time, core PCE may still be +0.6 pp above the Fed’s target which might limit the size of cuts (25 bps seems like the most likely option at this point). That said, the debate around size of cuts in Nov may still not be entirely over, at least not until we get the Oct jobs data.
If you’re interested in learning my longer-term PCE estimates (until mid-2025), consider subscribing to Marko’s Fed Report which goes out before each Fed meeting and, 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 Q2 2025)
Unemployment rate forward trajectory (until the end of Q2 2025)
What will the Fed likely do in 2024 and 2025 and why
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Marko’s Fed report that goes out each month before CPI and contains analyses of forward looking inflation indicator, detailed CPI forecast and CPI trajectory until mid-2025
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