August PCE inflation met expectations

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Published Date 9/26/2025

Markets waited all week for inflation data, August PCE inflation was right on expectations, no deviations. Month/month overall PCE +0.3%, year/year +2.7%; core PCE (ex-food and energy) month/month +0.2%, year/year core inflation 2.9%.

August personal income forecasts +0.3% increased 0.4%, month/month personal spending increased 0.6% against estimates of +0.4%. It was the sharpest increase in personal spending in five months, extending the period of resilience from the US consumer despite heightened economic uncertainty and elevated borrowing costs. Spending rebounded for nondurable goods (0.8% versus 0.0% in July) and rose at a steady pace for services (at 0.5%). In the meantime, consumption eased for durable goods (0.8% versus 1.7%).

Yesterday weekly jobless claims were lower than thought; over the last two weeks claims have declined 47K, well below estimates. Powell has continued to mention his concern the employment sector is softening, recent claims for unemployment have not supported that view. Next Friday the September employment report will add more to the equation.

There was little reaction to the two 8:30 am ET releases. The President announced more tariffs, beginning next Wednesday imported branded and generic pharmaceuticals will face a 100% tariff if a company is not building a manufacturing plant in the U.S.; kitchen cabinets, bathroom vanities, and associated products will see a 50% tariff; and upholstered furniture will have a 30% tariff rate.

Unless Congress can agree on a plan to keep the government running it will shut down next Wednesday when the Treasury budget for fiscal 2025 runs out of money. The last time there was a shutdown of the government was 2019. Congress will have just two days (Monday and Tuesday) to get something worked out. Markets are not showing much concern.

At 9:30 am he DJIA opened +196, NASDAQ +14, S&P +13. 10 year at 9:30 am 4.18% +1 bp. FNMA 5.5 30 year coupon at 9:30 am -2 bps from yesterday’s close and -3 bps from 9:30 am yesterday.

At 10 am the final September University of Michigan consumer sentiment index expected at 55.4, the index reported at 55.1. Consumers remain wary.

Source: TBWS

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Jeff Beck

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