PCE deflators reviewed: to go down further in coming months? - Nomura

Analysts at Nomura offered a review of the PCE deflators from the US session.

Key Quotes:

"The core PCE price index came in broadly in line with expectations, rising moderately by 0.089% m-o-m in July (Nomura: 0.069%, Consensus: 0.1%). While revisions to the past three months were mixed, y-o-y core PCE inflation declined, as expected, to 1.4% (1.406%) in July from 1.5% (1.506%) in the previous month (Nomura: 1.384%, Consensus: 1.4%). Overall, there are no major surprises in the underlying details.

Looking ahead, we think that y-o-y core PCE inflation could go down further in coming months, partly because of the base-effect from weakness in the first half of this year.

Although this is the last PCE inflation print before the September FOMC meeting, we will have the August CPI report on 14 September, which should provide a good sense of what the core PCE price index will look like for that month."

GDP tracking update:

"Altogether, we lowered our Q3 GDP tracking estimate by 0.1pp to 3.2% q-o-q saar. While personal spending growth in July was below our expectations, upward revisions to prior months were positive to our Q3 tracking. However, personal consumption of autos was stronger than expected, lowering our estimates of auto inventory accumulation in Q3. Additionally, pending home sales were slightly weaker than expected, portending further softness in residential investment this quarter."