US: PCE moderates to 2.9% in December, 11 months of improvement

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Bankinter| The Underlying Personal Consumption Expenditures (PCE) moderated to 2.9% year-on-year in December 2023 (from 4.9% Dec 2022). The Personal Consumption Expenditures rebounded to 2.6% year-on-year; 0.2% month-on-month as anticipated (from negative 0.1% average). The Underlying Deflator improved to 2.9% year-on-year (from 3.2% pre and 3.0% expected).

Month-on-month it met the 0.2% estimate (0.1% month-on-month previously). Personal Income was up 0.3% month-on-month, meaning no surprises. Personal Spending rose 0.7% m/m (versus 0.5% expected) and from 0.4% previously revised two tenths upwards.

Real Personal Spending grew 0.5% month-on-month in November and December. Two tenths higher than expected in December 2023 and two tenths upwardly revised in November 2023. The Saving Ratio moderated to 3.7% of Disposable Income, from 4.1% previously.

Assessment: Good evolution of the Underlying Consumption Deflator, which accumulates 11 consecutive months of improvement. The strength of Real Personal Spending growth and of the economy in general shown yesterday (GDP 4Q 2023 up 3.3% annualised quarter-on-quarter) takes pressure off the Fed to lower rates. We do not anticipate any moves at next week’s meeting on 1 February. We project first rate cut after the summer, in September.

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