In this morning’s data, the PCE Deflator decreased -0.1% in November, less than expected and was up 2.6% on an annual basis. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve, increased just 0.1% in November, also less than expected. Core rates grew 3.2% on an annual basis, a decrease of two-tenths from the previous month’s revised figure.
Meanwhile, Personal Income grew 0.4% in November, as expected and higher than the previous month. Personal Spending grew 0.2% in November, slightly less than expected. Real Personal Spending, which accounts for inflation, increased 0.3% in November. In addition, the personal savings rate as a percentage of disposable income was 4.1%, a slight increase from the 4.0% measure in October.
Overall, headline inflation data continues to moderate with a decrease in November. Core inflation measures were also less than expected, but annual increases remain above the Federal Reserve’s target. Both income and spending increased in November, however spending was a touch less than expected highlighted by a slight increase in the savings rate. Given the trajectory of core inflation has been lower over the past few months, the Federal Reserve recently changed its stance on policy, indicating rate decreases could occur in the future. How consumers react to this policy change, as well as its impact on company earnings and economic growth, will be a key factor for markets in the months ahead.
In all, the 10-year US Treasury yield ticks higher following the data and equity futures are mixed as we head into the market open. Have a safe and happy holiday season!
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