PCE for August in focus, headline seen up 3.7%, consumer confidence lowest in 12 years

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Summary · why it matters

Investors are watching the personal consumption expenditures price index, or PCE, for August, due for release tonight Thailand time. A survey of economists by Dow Jones expects both the headline PCE index and the core PCE index, which excludes food and energy prices, to rise 0.3% month on month. On a year-on-year basis, headline PCE is expected to rise 3.7% and core PCE 3.3%, unchanged from July, still far above the Fed's 2% inflation target. Michael Barr, one of the Fed governors, said tariff measures and a protracted war with Iran have stalled progress toward the inflation goal, and the Fed will likely need to keep raising rates. Meanwhile, John Williams, president of the Federal Reserve Bank of New York, pointed to the expansion of the artificial intelligence industry as another factor keeping inflation high, but struck a more dovish tone than Barr, saying another rate hike may be needed this year. On the consumer side, Wall Street economists expect U.S. consumer spending to rise 0.8% in August after a gain of just 0.2% in July. Bank of America reported that spending via debt and credit cards rose 6.9% from a year earlier in the week ending September 19, partly driven by gasoline expenses, which jumped 26.5%. Excluding that spending, overall outlays still rose 5.7%. However, data from the Conference Board released last night showed its consumer confidence index fell 6.7 points to 81.9 in September, the lowest since 2014 and below the Bloomberg survey estimate. Views on current economic conditions dropped nearly 8 points to the lowest since 2021, while expectations for the next six months fell to the lowest in more than a year.

Impact on assets 4

Financials▲
Bank of America Corp
BAC
± MixedDemandrelevance

BofA reports card spending up 6.9% y/y, but this is its own data release, not a clear driver for the stock.

Communication Services▲
Others▲
％Effective Federal Funds Rate
EFFR
▲ PositiveMonetaryrelevance

Fed officials Barr and Williams signal further rate hikes may be needed as inflation stays above target, pushing the effective fed funds rate higher.