Back Economics

Consensus for core PCE inflation and underlying detail

Published on March 14, 2024

Gerard MacDonell

I am not set up to map the underlying detail in the CPI and PPI reports to the core PCE deflator and its own underlying detail. But I can put together the implied consensus for underlying metrics that may interest you. Below I go through that consensus, without limited effort to interpret the data for its macro implications. This is mostly a just the facts approach, to foster objectivity and because getting down in the nitty gritty for a few hours fries my brain.

I will update these, probably marginally, when the screen consensus is fully formed just ahead of the deflator release. For now, we should think of this as where the informed consensus is now, which is a guide to what the screen consensus will be later. There is no screen consensus for most of the detail I show, but it will be roughly implicit.

A screenshot of a computer

Description automatically generated — *Source: BEA, Informed consensus and FH inferences*
*Data are informed consensus for February, with the implicit detail backed out by FH*

This month there is no distinction to be made between the guesstimate for the core PCE deflator and its Market Price Only (MPO) core. The best guess for the MPO version is that it will be the average 2 bps below the core. However, in recent months non-market prices have tended to add to the overall core, so stripping them out makes the momentum in the MPO look somewhat less concerning.

A graph of a graph of a number of people

Description automatically generated with medium confidence — *Source: BEA, FH inference from informed consensus*
*Data are actual to January and estimates for February.*

The distribution of inflation across goods and services ex-housing was interesting this month, in the sense that all the strength was in goods. Great call by Fed Chairman Powell who had been anticipating this and thus suggesting that he needed to see some relief in core services ex-housing. That was a problem because recently core services had been arguably in an accelerating trend, but it looks somewhat less so now. The fact that this month was dominated by goods is probably net dovish in isolation, because goods prices shed less light into the state of the labor market and are more noisy, at least typically.

A graph of a number of people

Description automatically generated with medium confidence — *Source: BEA, FH inference from informed consensus*
*Data are actual to January and estimates for February.*

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.