Fed’s Favorite Inflation Indicator Hottest Since April, Govt Handouts Continue To Soar

The Fed’s favorite inflation indicator – Core PCE – rose less than expected on a MoM basis (+0.1% vs +0.2% exp), but on a YoY basis, Core PCE rose from 2.6% to 2.7% (in line with exp) – the highest since April...

Source: Bloomberg

The headline PCE did fall to +2.2% YoY – the lowest since March 2021…

Source: Bloomberg

So-called SuperCore PCE re-accelerated in August to +3.29% YoY…

Source: Bloomberg

Both income and spending rose less than expected in August (income smallest MoM rise since Jul 2023 and spending equal lowest since Jan 2024)…

Source: Bloomberg

On a YoY basis, both spending and income growth slowed…

Source: Bloomberg

Thanks to massive revisions (don’t even get us started), the savings rate comps are a mess. But we note that at 4.8% of disposable income, it is at its lowest since Dec 2023. For comparison, the savings rate (pre-revision) in July was 2.9%… WTF!

Source: Bloomberg

Personal income was revised dramatically higher…

Source: Bloomberg

And finally, imagine how bad things would be if the government wasn’t having over billions to ‘we, the people’ all of a sudden…

Source: Bloomberg

In other words, the consumer is now wiped out and yet key inflation measures refuse to drop materially. So yes, the Fed will continue to cut (election year after all) and then we can finally unleash the second coming of the Arthur Burns hyperinflation Fed.