Succinct Summation of the Week's Events, including today's data

Succinct Summation of the Week's Events:

Positives,

1)February inflation PCE was as expected headline when including the upward February revision while the core gain of .3% was in line though February was revised up by one tenth. The 2.5% y/o/y headline rise and by 2.8% core, was as forecasted and thus should change nothing about what we heard from Fed members this week as the lack of further inflation declines gives the Fed more reason to wait. Service prices (dominated in PCE by healthcare costs and less so housing), rose 3.8% y/o/y from 3.9% in the prior two months. Goods prices were down .2% y/o/y, back to the pre Covid trend but do they stay there? I say no. Energy prices rebounded by 2.3% m/o/m, though still down y/o/y. Food prices were flattish m/o/m though up 1.3% y/o/y. 

I WILL SAY AGAIN, THE DOWNSIDE OF INFLATION, AFTER THE HUGE SPIKE, IS BEING DEEMED A VICTORY BY SOME AND ENCOURAGING A FEW FED MEMBERS TO WANT TO CUT BUT I CONTINUE TO ARGUE THAT HAVING INFLATION STAY DOWN SUSTAINABLY IS WHEN THE INFLATION WAR IS WON. Sorry for the all caps as I had to get your attention on a holiday Friday.

2)Personal spending in February was up .8%, well above expectations of .5% but as personal income was up just .3%, the savings rate fell to just 3.6%, the lowest since December 2022. Is the consumer strong or buckling because they continue to draw down on their savings? And how much of this spending is being helped by Buy Now, Pay Later? Within income, positively, private sector wages grew by .8% m/o/m, the same pace as personal spending. 

3)Initial jobless claims were little changed at 210k vs 212k last week and was in line when including a revision. The 4 week average was unchanged at 211k.

4)Pending home sales in February rose 1.6% m/o/m about as expected after a 4.7% drop in January and 5.7% rise in December. Regionally, sales were dominated by the Midwest which was up 10.6% from January and partly offset by a 6.5% decline in the West. There was little change in the Northeast and South. The NAR said “The high cost regions in the Northeast and West experienced pullbacks due to affordability challenges” and they stated the obvious affordability issue, “Home prices rising faster than income growth is not healthy and adds challenges for first time buyers.”

5)After falling by 2.1 pts in February, the final March UoM consumer confidence index bounced back by 2.5 pts to 79.4 and that is the best since July 2021, though still remains well below the February 2020 print of 101. One yr inflation expectations were 2.9% vs 3% in February and 2.9% in January. The 5-10 yr inflation guess also ticked down one tenth to 2.8%. The bottom line from the UoM, “Assessments and expectations of personal finances improved modestly from last month, as the perceived negative effects of high prices and expenses on living standards eased. Strong stock market performance this month supported sentiment gains only for those with the largest holdings, with little impact on the index. Overall, sentiment is essentially unchanged throughout the first quarter of 2024, remaining just shy of the midpoint between the pre-pandemic level of sentiment and the historic trough from June 2022. This stability reflects a perception among consumers that the economy has been holding steady in its current state.”

6)Core durable goods orders in February were a touch above expectations when we include the downward revision to January. The internals were mixed but overall in dollar terms orders have flat lined since August 2022.