The PCE Price Index for October showed the following key data:
The core PCE price index (excluding food and energy) rose 2.8% year-over-year and 0.3% year-over-year, in line with market expectations.This was the highest level since April 2024.
The total PCE price index rose 2.3% year-over-year and 0.2% sequentially, also in line with expectations and still above the Fed's 2% target.
Trend-wise, this is a "heads-up" in the downward channel, but we think it's a good opportunity for now.
In terms of sub-categories.
Food prices were virtually unchanged; energy fell 0.1%; and housing moved higher in October, pushing up 0.4%
Core services prices, excluding housing and energy, rose 0.4% from September from a year earlier, the biggest gain since March of this year, and super-core PCE services soared 3.5% year-over-year, with strong demand in health care.
But.
the subcomponent that has the greatest impact on inflation - housing - has a lag, and the current trend in new rents is currently down through the end of the year, and there is no fear of a significant rebound;
The itemized portion of healthcare is seasonal, and the current health care package that the Biden administration is trying to improve will help to further soothe inflationary trends in the health care sector;
Looking at the performance of the superstores, retailers Walmart, Target, and Best Buy have extended their holiday promotions, and the overall competitive trend is now clear that cheaper items are selling better and will continue to pull down inflationary pressures.
As a result, we believe the current PCE index remains in a reasonable downside range.As for whether the Fed will change the pace of rate cuts because of the presidential change, may also need more data to prove.
After all, Powell is notorious for "lagging behind the market".
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