US Consumer Prices Rise, Inflation Ahead
$DIA, $SPY, $QQQ, $VXX
US consumer prices (PCE) rose March YTD, with a measure of underlying inflation moving to the Fed’s 2% target.
Monday, the rise in the annual inflation gauges reported by the Commerce Department was seen by economists and Fed officials, it is not expected to alter the gradual pace of interest rate increases.
Consumer prices as measured by the personal consumption expenditures (PCE) price index +2.0% on a Y-Y basis last month. That was the biggest gainer since February 2017.
The PCE price index was unchanged on a monthly basis largely because of cheaper gasoline after advancing 0.2% in February.
Excluding the food and energy components, the PCE price index rose 1.9% in the 12 months through March, also the biggest increase since February 2017.
The core PCE price index rose 0.2% on a M-M basis in March after a similar gain in February. The core PCE index is the Fed’s preferred inflation measure. It is in line with economists’ expectations.
Minutes of the Fed’s March 20–21 policy meeting published this month showed officials expected the annual PCE price indexes to accelerate in March partly because of “the arithmetic effect of the soft readings on inflation in early 2017 dropping out of the calculation.”
The FOMC is scheduled to convene Tuesday and Wednesday for a regular policy meeting.
Economists now expect the core PCE price index to hit 2.0% in May because of favorable base effects. Inflation is also rising as the labor market tightens. The government reported last Friday that wages and salaries recorded their biggest increase in 11 years in Q-1.
The Commerce Department’s report Monday also showed consumer spending, which accounts 70% US economic activity, increased 0.4% in March after being unchanged in February.
The data was included in last Friday’s advance Q-1 GDP report, which showed the economy growing at a 2.3% annualized rate during that frame
The US housing market continues to be hobbled by an inventory squeeze that is holding back sales growth. The National Association of Realtors (NAR) said contracts to buy previously owned homes rose 0.4% in March, slowing from February’s 2.8% increase.
Monday, the major US stock market indexes finished at: DJIA -148.04 at 24163.15, NAS Comp -53.53 at 7066.27, S&P 500 -21.86 at 2648.05
Volume: Trade on the NYSE came in at 1.01-B/shares exchanged
- NAS Comp +2.4% YTD
- Russell 2000 +0.4% YTD
- S&P 500 -1.0% YTD
- DJIA -2.3% YTD
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