Bankinter | The US economy is growing at a slower pace than expected, although the PCE comes in as a positive surprise.
(i) Q4 2025 GDP revised significantly downwards: 0.7% q/q annualised against the expected 1.4% and preliminary figure of 4.4%. Consumption was also revised downwards: 2% against the expected 2.4% and preliminary figure of 3.5%. Of particular note is the rebound in the GDP deflator, revised upwards to 3.8% (up from the expected and preliminary 3.6%), reflecting some persistence of inflation.
(ii) PCE deflator (January): 2.8% year-on-year versus the expected and previous 2.9%.
Core PCE Deflator: 3.1% year-on-year, in line with expectations.
(iii) Durable Goods Orders disappoint as they stagnated in January: 0.0% month-on-month versus an estimated 1.1% and a previous reading of negative 0.9% (revised from negative 1.4%). Excluding transport: 0.4% against 0.5% estimated and 1.0% previously.
(iv) Job Openings (JOLTS) higher than expected in January: 6,946k against 6,750k expected and 6,550k in December (revised from 6,542k).
(v) University of Michigan Consumer Sentiment Index falls less than expected in March (prelim.): 55.5 against 54.8 expected and 56.6 previously. Current conditions: 57.8 (from 56.6 previously); Expectations: 54.1 (from 54.5 previously). Inflation 1-year: 3.4% (compared to 3.7% expected); 5–10 years: 3.2% (from 3.3% previously and 3.4% expected).
Bankinter’s analysis team’s view: Overall, this set of data presents a mixed picture, but with a dovish bias for the Fed. On the one hand, the slowdown in growth and the moderation in the PCE reinforce the likelihood of rate cuts in the medium term. On the other hand, the strength of the labour market and stable confidence limit the pressure for an immediate monetary policy shift. It is worth noting that most of these indicators relate to January data and, therefore, do not yet reflect the potential effects of the Iran conflict or its impact on energy prices.
