On Friday, September 29th, the eagerly anticipated data concerning real inflation, specifically the Personal Consumption Expenditures (PCE) Index, was disclosed, showing a modest uptick of 0.1% in August. The PCE is a pivotal gauge for assessing inflation in the United States and wields significant influence in shaping the country's monetary policies by the Federal Reserve (Fed).
This release surprised by falling below the market consensus, which had anticipated a 0.2% increase in the index. Nevertheless, when compared to the same period last year, the PCE posted a 3.9% increase, in line with Refinitiv's forecasts.
Although these numbers may appear positive at first glance, Citibank expressed concerns about potential risks of a substantial acceleration in inflation in 2024. However, it is important to note that the disclosure of the PCE does not alter the bank's macroeconomic outlook for the United States.
Citibank emphasized that the recent slowdown in inflation may not be enduring, pointing out that while real consumption remained virtually unchanged in August compared to the previous month, there was a significant increase in July. This suggests that the deceleration may not be a firmly established trend.
The Citibank report underscores that revisions indicate the core inflation of consumption continues to exceed the 2% target. Robust consumer demand may enable companies to pass on rising energy and labor costs to prices.
Meanwhile, JPMorgan, in a note to institutional investors, highlighted that the PCE's increase was in line with their expectations, albeit slightly below market consensus. The bank also noted that real consumption grew by 0.6% in July before slowing down in August.