Personal Consumption Expenditures met expectations

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December personal consumption expenditures (PCE) reported at 8:30 am ET was right on the forecasts. Traders and investors have waited for the report this week, that there were no deviations from expetations. The core PCE (ex-food and energy) increased from +0.1% to +0.2% as expected, year/year core +2.8% unchanged from November and as anticipated. The fractional increase in month/month inflation puts the Fed still on the fence and not expected to lower rates at the March FOMC meeting. Powell said Wednesday he focuses more on year/year inflation measurements, at 2.8% its well above the 2.0% the Fed and other central banks want to see.

December personal income expected +0.4% in line with forecasts, personal consumption was thought to be +0.5% increased to 0.7% and November consumption revised from +0.4% to +0.6%. The increase in December income driven by private wages and salaries (0.4% vs. 0.5%). Additional gains were recorded in proprietors' income with inventory valuation and capital consumption adjustments (0.5% vs. 0.2%), rental income with capital consumption adjustment (0.6% vs. 0.2%), personal income receipts on assets (0.2% vs. -0.2%), and personal current transfer receipts (0.2% vs. 0.1%). December spending totaled $20.39 trillion. Consumer expenditures accelerated in services (0.6% versus 0.4%) and non-durable goods (1% versus 0.3%). On the other hand, spending on durable goods eased (0.6% versus 2.7%). Consumer expenditures accelerated in services (0.6% versus 0.4%) and non-durable goods (1% versus 0.3%). On the other hand, spending on durable goods eased (0.6% versus 2.7%).

Q4 employment cost index was forecast at +0.9%, reported +0.9%, year/year +3.8% down from Q3s 3.9%. Compensation costs grew at a faster pace in the private sector (0.8% versus 0.7%), while they slowed for state and local government organizations (0.9% versus 1.1%).

At 9:30 am the DJIA opened +144, NASDAQ +154, S&P +27. 10 year at 9:30 am unchanged at 4.52%. FNMA 6.0 30 year coupon at 9:30 am -5 bps from yesterday’s close and -7 bps from 9:30 am yesterday.

At 9:45 am January Chicago purchasing managers index, expected at 40.0 from 36.9, the index reported at 39.5, the area still in a funk that has been the case for over a year (index under 50).

The first Fed official this morning after the weeklong lock down; Federal Reserve governor Michelle Bowman. Bowman said she still sees risks that inflation could take a higher path. “In light of these considerations, I continue to prefer a cautious and gradual approach to adjusting policy”, and that she thinks easier financial conditions over the past year might have contributed to stalled progress. “It seems unlikely that the overall level of interest rates and borrowing costs are exerting meaningful restraint.”

Source: TBWS


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American Home Lending USA, LLC - NMLS ID: 71983. To verify licensing, visit NMLS Consumer Access (www.nmlsconsumeraccess.org). Equal Housing Lender.

Jeff Beck

President

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American Home Lending USA, LLC

240 S Buchanan St, Edwardsville IL 62025

Company NMLS: 71983

Office: 618-310-0091

Cell: 618-806-2281

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