Today’s economic news highlights “Government Power.” Unproductive government jobs saw wages rise 8.5% YoY while productive private sector jobs saw wages rise by only 5.5% YoY. This is Bidenomics!!!
With inflation data surprising to the upside recently…
…the doves’ last chance for sooner than later rate-cuts is today’s Core PCE Deflator – often described as The Fed’s favorite inflation signal. Last month saw an uptick in the headline deflator and following yesterday’s core PCE rise for Q1, all eyes are on the March data released this morning.
However, both the headline and core PCE Deflator data printed hotter than expected (+2.7% vs +2.6% exp vs +2.5% prior and +2.8% vs +2.7% exp vs +2.8% prior respectively)…
The silver lining is that this hot PCE print is ‘dovish’ relative to the GDP-based data we saw yesterday, with whisper numbers of +0.4 to +0.5% MoM (vs the +0.3% print).
But still – it’s not good for the doves.
As WSJ Fed Whisperer Nick Timiraos notes, the 3-Month annualized core PCE jumped to 4.4%…
The Service sector led the MoM and YoY acceleration in headline PCE…
And for Core PCE, it was Services prices too that drove the acceleration…
The so-called SuperCore – Services inflation ex-Shelter – rose once again, and was revised higher…
Stripping it back even further, Transportation Services and ‘Other Services’ were the biggest gainers in SuperCore…
Income and Spending both rose again on a MoM basis with spending outpacing income (again). The 0.8% MoM rise in spending was the highest since Jan 2023…
Spending is accelerating fast relative to incomes (on a YoY basis) – and remember this is all nominal…
On the income side, government and private wage growth accelerated:
- Govt wages rose to 8.5% YoY, from 8.3%, the highest Dec 22
- Private wages rose to 5.5% YoY, from 5.4%, highest since Dec 22 as well
Which meant the personal savings rate plunged to 3.2% from 3.6% – its lowest since Nov 2022…
And the soaring credit card balance explains how people are getting by…
And all this amid the fourth straight month of government handouts…
Finally, while the markets are exuberant at the survey-based disinflation, we do note that it’s not all sunshine and unicorns. The vast majority of the reduction in inflation has been ‘cyclical’…
Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs.
Is The (apolitical) Fed going to be able to cut at all this year like Joe Biden said they would?
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