April 29, 2024 — PCE Up 2.8 Percent; Q1 2024 GDP Up 1.6 Percent

APRIL 29, 2024 – PCE UP 2.8 PERCENT; Q1 2024 GDP UP 1.6 PERCENT

The core personal consumption index, excluding food and energy, rose 2.8 percent from a year ago, up month-over-month by 0.3 percent, a bit higher than expected. The PCE is the key inflation indicator tracked by the Fed. Investors were relieved the number was not higher, but it also did not assure the markets that inflation is under control and the Fed will feel it’s appropriate to lower rates soon.

In another data release last week, the Commerce Department announced the GDP for the first quarter of 2024 grew by 1.6 percent, lower than expectations which were in the range of 2.4 percent. If the inflation data was not so strong, a weakening GDP number would raise hopes the Fed would lower rates. Yet the economy does not seem that stressed, as consumer spending rose 0.8 percent last month and the unemployment rate remains low.

It is unlikely the Fed will move on rates in the summer, unless the data over the next few months changes dramatically. Investors are now pricing a 19 percent chance the Fed will keep rates where they are through the end of the year; a month ago, only 1 percent felt that would happen.