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Nasdaq 100 Trims Gains as Fed’s Favorite Inflation Gauge Rises More than Expected

ByDiego Colman

Jul 29, 2022
Nasdaq 100 Trims Gains as Fed’s Favorite Inflation Gauge Rises More than Expected



  • June U.S. consumer spending advances 1.1% versus 0.9% expected. Personal income at 0.6% m-o-m, slight above expectations
  • Core PCE, the Fed’s favorite inflation gauge, climbs 0.6% month-on-month and 4.8% from a year earlier, one tenth of a percent above forecasts
  • Nasdaq 100 futures trim pre-market gains as traders on stubburnly high inflationary pressures

Most Read: US Gross Domestic Product Shrinks 0.9% in Second Quarter as Investment Slumps

The U.S. Bureau of Economic Analysis released its latest report on personal consumption expenditures this morning. According to the agency, the June personal spending advanced 1.1% month-over-month versus the 0.9% expected – a sign that the American consumer remains resilient despite soaring consumer prices. Strong consumer spending at the end of the second quarter may help allay fears of a recession considering that household consumption is main driver of U.S. economic activity.

Elsewhere, the PCE Price Index, which measures costs that people living in the U.S. pay for a variety of different items, surged 1.0% month-over-month and 6.8% year-over-year, the highest level since 1982. Meanwhile, the core PCE indicator, the Federal Reserve’s preferred inflation gauge that excludes food and energy and is used to make monetary policy decisions, advanced 0.6% on a seasonally adjusted basis, bringing the annual reading to 4.8% from 4.7% in May, one tenth of a percet above expectations, signaling inflationary pressures are struggling to cool in the economy.


Source: DailyFX Economic Calendar

Friday’s data was a mixed bag. Household spending grew at a strong pace in nominal terms, but the advance was mainly driven by rising prices. In any case, it is encouranging to see that the U.S. consumer remains healthy despite mounting challenges, including falling real income. This may help allay fears that that household consumption is about to collapse.

On the inflation front, there was no good news. The lack of directional improvement in the PCE index means that the Fed will have to continue raising rates in the coming months to slow demand in their effort to restore price stability. This suggests that a monetary policy pivot may not come until 2023, at the earliest.

Immediately after the personal consumption expenditures report crossed the wires, Nasdaq 100 futures contracts trimmed some pre-market gains as Treasury yields edged higher amid concerns that the U.S. central bank will not be able to slow the pace of interest rates hikes in an environment of strong inflationary forces. However, solid earnings from key technology companies, including Apple and Amazon, is offsetting the negative surprise on the macro front.


PCE core inflation

Nasdaq 100 Chart Prepared Using TradingView


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—Written by Diego Colman, Market Strategist for DailyFX


Image and article originally from www.dailyfx.com. Read the original article here.