(Reuters) – The personal consumption expenditures (PCE) price index rose a less-than-expected 0.1% in November, marking a cooler inflation picture than October’s unrevised 0.2% gain, and, combined with solid but disappointing consumer spending, supported markets struggling with the Federal Reserve’s “hawkish’ rate cut this week.
The Commerce Department also reported on Friday that in the year through November, the PCE price index advanced 2.4% after rising 2.3% in October. The increase in the annual inflation rate was partly due to last year’s low readings dropping out of the calculation.
Excluding the volatile food and energy components, the PCE price index climbed 0.1%, after an unrevised 0.3% gain in October. In the 12 months through November, the so-called core inflation increased 2.8% after advancing by the same margin in October.
MARKET REACTION:
STOCKS: The S&P 500 pared losses to -0.51%, still pointing to a weak open on Wall Street
BONDS: U.S. Treasury 10-year yields fell to 4.506% and the two-year yield fell to 4.259%
FOREX: The dollar index extended lower show a loss of 0.42%
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“Powell must be getting tired of the data undermining things he says. Lower inflation than expected and slower spending growth don’t corroborate the Fed’s sudden tilt towards hawkishness. The jump in auto sales isn’t likely going to be a massive driver of growth over the next year. Consumers aren’t shelling out more on everyday spending items. The Fed will likely change its tune once again sometime soon.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“All the macro data this morning was cooler than expected. This is good news for markets, but it doesn’t change the path for the Fed.”
“It indicates that we got a bit of a moderation in inflation, it doesn’t necessarily make a trend, but it should relieve some of the pressures in the bond market. Yields probably will respond. And in terms of the equity markets, I think it should help lift some of the early weakness.”
“Spending is a little bit on the weak side. Does that indicate that perhaps the consumer is losing by is losing buying power? I don’t think so.”
HELEN GIVEN, FX TRADER, MONEX USA, WASHINGTON DC
“The market reaction that we’re seeing right now looks like it’s mostly being driven by that personal income and personal spending release that came with it. Personal income and personal spending were both under expectations, but the prior month the personal income was revised up, so I think this reaction is going to be fairly muted.”
