Inflation Rate Anemic, US GDP Anemic, Fed Rate Hikes Questionable

Inflation Rate Anemic, US GDP Anemic, Fed Rate Hikes Questionable

Inflation Rate Anemic, US GDP Anemic, Fed Rate Hikes Questionable


US inflation barely rose in March on soft consumer spending , making it less likely that the US Fed will be able to hike interest rates 2X this year.

The US Commerce Department said Friday the PCE (personal consumption expenditures) price index, excluding the volatile food and energy components, edged up 0.1% last month after an upwardly revised 0.2% increase in February.

Last month’s gain in the PCE was in line with economists’ expectations. In the 12 months through March the core PCE rose 1.6% after advancing 1.7%  in February.

The core PCE is the Fed’s preferred inflation measure and is running below the US central bank’s 2% target. The Fed said Wednesday its policy-setting committee was continuing to “closely” monitor inflation.

It left its benchmark overnight interest rate unchanged indicating it is in no hurry to tighten monetary policy further.

Fed officials earlier this year forecast 2 more rate hikes for Y 2016. But market-based measures of Fed policy expectations are leaning toward 1 rate increase this year.

Inflation is being restrained by a strong USD and cheaper energy. A tightening labor market has failed to generate and significant wage gains, contributing to anemic consumption growth.

In March, consumer spending ticked up 0.1% after an upwardly revised 0.2% gainer in February. Consumer spending, which accounts for avout 70% of US economic activity, was previously reported to have risen 0.1% in February.

When adjusted for inflation, consumer spending was unchanged after increasing 0.3% in February. The consumer spending figures were included in the 1st estimate for the Q-1 GDP report published Thursday. The economy grew at a 0.5% annual rate in the January-March period, a sharp slowdown from Q-1’s 1.4% pace.

Personal income rose 0.4% in March after rising 0.1% in February. Savings jumped to $735.5-M last month, the highest mark since December 2012, from $696.4-M in February.

Friday, the US major stock market indexes finished at: DJIA -57.12 at 17773.64, NAS Comp -29.93 at 4775.36, S&P 500-10.51 at 2065.30

Volume: Trade was heavy with over 1-B/shares exchanged on the NYSE

  • DJIA +2.0% YTD
  • S&P 500 +1.1% YTD
  • Russell 2000 -0.4% YTD
  • NAS Comp -4.6% YTD
HeffX-LTN Analysis for DIA:  Overall Short Intermediate Long
Neutral (0.22) Neutral (0.08) Neutral (0.24) Bullish (0.33)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.08) Neutral (-0.00) Neutral (0.03) Neutral (0.22)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (-0.11) Bearish (-0.36) Neutral (-0.05) Neutral (0.10)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.34) Neutral (-0.24) Bearish (-0.28) Very Bearish (-0.50)

Have a terrific weekend.

Paul Ebeling

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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