Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: I'm Nathan Hager in New York, and we are getting
Speaker 2: some breaking economic data crossing the Bloomberg terminal Personal Consumption
Speaker 2: Expenditures Price Index for February. This is the Fed's preferred
Speaker 2: gage of inflation. It comes in at two point eight
Speaker 2: percent on a year over year basis. That is the
Speaker 2: core deflator, which leaves out housing rents, which is very
Speaker 2: volatile in terms of the price pressures that we see.
Speaker 2: The personal income deflator for the month of February on
Speaker 2: a month over month basis comes in at three tenths
Speaker 2: of one percent. That was just shy of what economists
Speaker 2: surveyed by Bloomberg we're expecting on a four tenths of
Speaker 2: one percent read, so that's unchanged from the month of January.
Speaker 2: Personal income comes in a little light at three tenths
Speaker 2: of one one percent, that's down from one percent in January.
Speaker 2: And personal spending comes in at eight tenths of one percent.
Speaker 2: That's quite a bit higher than economists surveyed by Bloomberg
Speaker 2: had been expecting, and a big jump from a two
Speaker 2: tenths of one percent read in January. Let's bring in
Speaker 2: Bloomberg's International Economics and Policy correspondent Mike McKee with a
Speaker 2: little bit more context on these numbers. In terms of
Speaker 2: the PC to flavor MIC, it looks like it comes
Speaker 2: in bang in line with expectations.
Speaker 1: The headline number is a little bit lower three tenths
Speaker 1: than was expected at four tenths was the consensus, but
Speaker 1: of course this is very tight numbers and rounding is
Speaker 1: probably involved here. We did see inflation revised up on
Speaker 1: a month over month basis for January from three tenths
Speaker 1: to four tenths, so we do see a decline there
Speaker 1: in the month over month, but the year over year
Speaker 1: rises a little bit from two point forward a two
Speaker 1: point five percent. That's probably base effects. The core comes
Speaker 1: in much lower than the prior month. In January it
Speaker 1: was up half a percent, now it's only up three tenths,
Speaker 1: and the core deflator on a year over year basis
Speaker 1: is down to tick two point eight percent for two
Speaker 1: point nine percent, so it's sort of a mixed picture here.
Speaker 1: In terms of prices, goods prices increased about half a percent,
Speaker 1: prices for services increased three tenths of a percent. Now,
Speaker 1: goods prices had been the major deflationary force over the
Speaker 1: last several months. So the fact that goods prices increased
Speaker 1: not particularly good news. We'll look for the breakdown on
Speaker 1: what happened. Their energy prices were up two point three percent,
Speaker 1: so that was the major problem. I think. With the
Speaker 1: good side, food prices increased just a tenth of eight percent,
Speaker 1: so good news there. So it looks Nathan like it's
Speaker 1: sort of a mixed picture. It is a little bit
Speaker 1: better than anticipated, but for the Fed it is not
Speaker 1: enough to push them to want to make any changes
Speaker 1: in their timing for rate cuts.
Speaker 2: Let's talk a little bit about the revisions as well, Mike.
Speaker 2: We've got those numbers just coming in as well.
Speaker 1: Yes, as I mentioned the personal spending numbers and eight
Speaker 1: tenths unrevised real personal spending, though was revised a little
Speaker 1: bit lower from a last month inflation adjusted basis. In
Speaker 1: January was down two tenths. It had originally been reported
Speaker 1: down one tenth and now it's up four tenths for February.
Speaker 1: So again, that is a good news number for the
Speaker 1: Fed and for probably the White House because it shows
Speaker 1: that people are getting a little bit ahead of inflation.
Speaker 2: So let's talk a little bit more about what's driving
Speaker 2: these latest numbers right now. You mentioned that the goods
Speaker 2: side of the inflation picture came in a little bit
Speaker 2: hotter in terms of the fact that this seems to
Speaker 2: be coming in as a mixed read. What does that
Speaker 2: tell us about how the Fed could react.
Speaker 1: Well, they're going to look past this, They're gonna take
Speaker 1: it on board, but they don't meet again until May first,
Speaker 1: so they'll have another indicator for the March numbers just
Speaker 1: before their meeting at the end of March, and if
Speaker 1: they see this kind of progress, it's probably not going
Speaker 1: to be enough to get them to make any kind
Speaker 1: of moves in May. We're still seeing the inflation numbers
Speaker 1: a little bit on the high side for them. They
Speaker 1: use the PCE as their target, and their target of
Speaker 1: course two percent, and now they're two and a half percent,
Speaker 1: so they'd want to see more progress there. They'd want
Speaker 1: to see more progress on the core deflator, because the
Speaker 1: only reason it looks better today is because it was
Speaker 1: revised up in January.
Speaker 2: Bloomberg Internet National Economics and Policy correspondent Michael McKee with
Speaker 2: us as we continue to analyze this preferred gauge of
Speaker 2: inflation for the Federal Reserve. The PC deflator coming in
Speaker 2: a little bit hotter than expected, with two and a
Speaker 2: half percent year over year read in terms of the
Speaker 2: headline number, and three tenths of one percent also unchanged
Speaker 2: on a month over month basis from the month of January.
Speaker 2: Let's get some more analysis.
Speaker 1: Now.
Speaker 2: We're joined by Tom Porcelli, the chief US economist at
Speaker 2: p GYM Fixed Income. Tom, great to have you with
Speaker 2: us on this good Friday. Your reaction to these numbers, Yeah.
Speaker 3: I mean, look, I think Mike has always nailed it.
Speaker 3: I mean I think that it's sort of a mixed
Speaker 3: bag here. You know. I think people will look at
Speaker 3: the spending number and I think, you know, let's say, hey,
Speaker 3: you know, the consumer is really sort of crushing it
Speaker 3: here in Q one. But the reality is, I mean
Speaker 3: this came with a drawdown in saving, an additional drawdown
Speaker 3: in saving, which is you know again it's it's it's
Speaker 3: sustainable only to a point, you know, and and and
Speaker 3: so I don't like that you have this big burst
Speaker 3: in spending with income that was, you know, sort of
Speaker 3: fairly modest. Now again, I would say to the mixed
Speaker 3: bag idea, if you look at wages. Wages were pretty
Speaker 3: pretty decent. But you know the problem for me, and
Speaker 3: you know, this is something we've been flagging if you
Speaker 3: just look at disposable income, right, I mean, that's really
Speaker 3: where the rubber meets the road on this, you know,
Speaker 3: disposable income, real disposal income to be specific. You know,
Speaker 3: it's it's it's been flat. I mean it actually it
Speaker 3: fell slightly month on months in this report, but you
Speaker 3: know it's been pretty flat now over the last couple
Speaker 3: of months. That again, I think just speaks to sort
Speaker 3: of the long term sustainability of you know, sort of
Speaker 3: the kind of consumption numbers that we've seen over the
Speaker 3: last couple of quarters, which is to say, we don't
Speaker 3: think you know, you're you're looking at a sort of
Speaker 3: a ripping backdrop here. I mean, I think things are
Speaker 3: just sort of just moving along at a sort of
Speaker 3: a you know, a decent pace. It's been our call,
Speaker 3: you know that that twenty four would be a pretty
Speaker 3: reasonable year from a growth perspective. But I think there's
Speaker 3: enough in here and enough being happening that we know,
Speaker 3: we sort of wonder about the ability for the consumer
Speaker 3: to really sort of press this meaningfully. More from here.
Speaker 3: The last thing I'll say on the inflation numbers. You know, look,
Speaker 3: I think they basically came in as was expected, particularly
Speaker 3: on the core. You know, core was a three tenths
Speaker 3: and it actually rounded up to three tenths. You know,
Speaker 3: it was actually point two six again for whatever that's worth.
Speaker 3: But I think this is the kind of movement that
Speaker 3: you know, we've been expecting. I think this is the
Speaker 3: kind of movement that the Fed continues to expect. So
Speaker 3: I think unbalanced, there's no big surprises here. I mean,
Speaker 3: I think whatever you thought about the sort of the
Speaker 3: backdrop before this number, I think you're going to continue
Speaker 3: to think that.
Speaker 1: Oh right up in Tom with a couple of numbers
Speaker 1: to lead people up to speed on some of the
Speaker 1: things that you're saying here. Wages and salaries were up
Speaker 1: eight tenths, which is a very large gain after three
Speaker 1: tenths in January. Interestingly enough, because the market has risen
Speaker 1: so much much, we should have seen I would have
Speaker 1: thought more income on assets, but personal interest income fell
Speaker 1: four tenths and dividend income down by three point seven percent.
Speaker 1: So I guess people aren't selling at this point, they're
Speaker 1: just reinvesting. You mentioned the real personal disposable income. It
Speaker 1: was down a tenth after being flat last month. That's
Speaker 1: the first decline since September. So you're right about the
Speaker 1: issue here of whether or not we're seeing people continually
Speaker 1: able to spend. It looks like from their from their
Speaker 1: wages and salaries they can. You mentioned the savings rate
Speaker 1: three point six percent compared to four point one percent,
Speaker 1: which is more important the savings rate or raises in
Speaker 1: your weekly paycheck.
Speaker 3: Yeah, I mean, you know, they obviously both matter. I
Speaker 3: mean they matter for different reasons, though, I think that's
Speaker 3: a really important idea. It's it's great that, you know,
Speaker 3: we continue to see income at large, right through through wages,
Speaker 3: through the wage channel, continue to move along at a
Speaker 3: at a pretty reasonable pace. But again, this this I
Speaker 3: think you know, we're trying to think big picture here.
Speaker 3: So the big picture thesis is, well, look, how has
Speaker 3: the consumer been driving spending. And they've been driving spending
Speaker 3: through a combination of drawing down saving and then again
Speaker 3: we're not talking about the excess savings thing, right that
Speaker 3: that long that story is long since gone. But you
Speaker 3: know what we're talking about now is cutting into the
Speaker 3: muscle of saving and so if you look at you know,
Speaker 3: sort of the bottom ninety nine percent, right, so just
Speaker 3: excluding the top one percent, what you see is that
Speaker 3: saving is now below where you would have been in
Speaker 3: a sort of a pre COVID baseline estimate. You know,
Speaker 3: that to me is noteworthy. And then you have to
Speaker 3: also consider there's sort of the other channel through which
Speaker 3: the consumer has really been able to sort of drive spending,
Speaker 3: and that's that's through credit usage, which again you know
Speaker 3: these are these are things that can persist, but you
Speaker 3: know that that this is not necessarily the healthy way
Speaker 3: of doing that spending.
Speaker 2: And just to reiterate, the Fed's preferred gauge of underlying
Speaker 2: inflation did cool last month after an even bigger January increase.
Speaker 2: When you factor in the revisions, the core Personal Consumption
Speaker 2: Expenditures price index stripping out food and energy increased three
Speaker 2: tenths percent from January, following a half percent reading in January.
Speaker 2: That was the biggest back to back gain in the
Speaker 2: year two point eight percent on a year over year basis.
Speaker 2: Nathan Hager in New York with more analysis of these
Speaker 2: inflation numbers and talking about the spending that we continue
Speaker 2: to see in this economy, the consumer continuing to hold up.
Speaker 2: Is there still a concern Tom that that is being
Speaker 2: driven by credit card usage by pulling into debt and
Speaker 2: can savings bolster that when we have the kind of
Speaker 2: inflation of elevated interest rates that we're seeing in this
Speaker 2: economy right now.
Speaker 3: Yeah, it can, it can it can persist. I mean
Speaker 3: we've seen this right historically. I mean to say, if
Speaker 3: if the consumer wants, they could draw down saving to zero,
Speaker 3: you know, in over three point six percent, So so
Speaker 3: it can certainly happen, and I think it can persist.
Speaker 3: And I think, you know, if I think about our
Speaker 3: forecast for this year and even into next year, you know,
Speaker 3: I think you're looking at a sort of you know,
Speaker 3: well again what will be sort of a trend like growth.
Speaker 3: So I have no I have no challenge with the
Speaker 3: actual numbers. What I have the challenge. What I have
Speaker 3: a challenge with is is how it's being achieved, because
Speaker 3: that that that's not enduring, right, I mean, you don't,
Speaker 3: you don't you don't generate and enduring you know, slash
Speaker 3: lasting economic expansion when when when that's doing the driving
Speaker 3: I think what we need to really look to is
Speaker 3: the sort of the labor backdrop, and look, I think
Speaker 3: that there's certainly some slowing that's taking place in pockets
Speaker 3: of the labor backdrop. I think that's, you know, been
Speaker 3: pretty apparent now for the lack tendful of months. I
Speaker 3: am encouraged by the wages and salaries increase. We'll want
Speaker 3: to dig into that more just to sort of see
Speaker 3: what the details were on the back of this number.
Speaker 3: But that kind of story for us really sort of
Speaker 3: fits snugly into our view. I mean, we think you
Speaker 3: can easily run at a one and a half to
Speaker 3: two percent pace this year, and I don't see any
Speaker 3: reason to sort of alter that view at this point.
Speaker 1: We had a little something here on the markets because
Speaker 1: we talked about how dividend and interest income was down
Speaker 1: during the month. We also see that the contributions to
Speaker 1: inflation from Wall Street are down significantly, I guess because
Speaker 1: maybe everybody's just reinvesting and not taking profits. But financial
Speaker 1: services fees and commissions just up a tenth of a
Speaker 1: percent after rising more than two percent last month, So
Speaker 1: a little bit less inflation pressure coming out of Wall Street.
Speaker 1: What we had called the pogo problem. As we do
Speaker 1: well on Wall Street, it increases inflation. But that brings
Speaker 1: up another question for you, Tom, and that is the
Speaker 1: wealth effect. The FED worries that the wealth effect is
Speaker 1: going to drive the economy longer. Do we see that
Speaker 1: really from the gains that we have seen in equity markets?
Speaker 1: Are people out spending that money or is that a
Speaker 1: subset of people who are making money who don't really
Speaker 1: have a marginal propensity to consume that is all that
Speaker 1: very high?
Speaker 3: So I will say that I believe in the wealth
Speaker 3: effect in the extremes, and I think it's very fair
Speaker 3: to say that we're in an extreme. I mean, if
Speaker 3: you think about sort of the single biggest asset for
Speaker 3: most people in this country, the single biggest outset at
Speaker 3: their house. And I think what people see is that
Speaker 3: their home prices have accelerated and accelerated in a very
Speaker 3: notable way. And I don't doubt for second that that
Speaker 3: feeds into this sort of hey, you know, I'm actually
Speaker 3: doing pretty good here, and that emboldens people to continue
Speaker 3: to go out and feel comfortable spending. Of course, I
Speaker 3: think what we have to recognize is it's great that
Speaker 3: home prices have written as much as they have, but
Speaker 3: you know, any of that home equity is trapped, right,
Speaker 3: This trapped because we're in a higher rate environment and
Speaker 3: it becomes incredibly complicated or very expensive for people to
Speaker 3: basically extract that money. So you know, again, i'd be
Speaker 3: careful with that idea. I mean again, I don't doubt
Speaker 3: for a second that it's happening, but it's paper wealth
Speaker 3: because because of high rates, no one can extract any
Speaker 3: of that.
Speaker 2: And tom as you know, we're going to be hearing
Speaker 2: from Chairman Powell in just a couple hours here eleven
Speaker 2: thirty am Wall Street time. He's going to be taking
Speaker 2: part in a moderated discussion. Do you expect these numbers
Speaker 2: are really going to change the message that we hear
Speaker 2: from Powell? As he's sounded a little at least a
Speaker 2: little bit more comfortable with the way the inflation roadmap
Speaker 2: has been going up to this point.
Speaker 3: Yeah, that's it's a resounding no. I mean that these
Speaker 3: numbers will not change anything for Powell. He literally just
Speaker 3: spoke there will be no reason for him to alter
Speaker 3: any of his messaging. Again, I think you know, this
Speaker 3: is something that they were looking for, particularly this core deflator,
Speaker 3: you know, hovering here at it now at two eight
Speaker 3: I think that this is this is the path that
Speaker 3: they were expecting from from an inflation perspective, and you know,
Speaker 3: and and again, I think the one thing that really
Speaker 3: came through very loud and clear during his last press
Speaker 3: conference was this this idea of over time, right. He
Speaker 3: kept on saying. In fact, I think he literally even said,
Speaker 3: we stress over time inflation will improve. Uh. And he
Speaker 3: said the multiple times. And I think that that that
Speaker 3: that fits very nicely with the numbers that we just saw.
Speaker 3: It is continuing to prove improve over time. I think
Speaker 3: the other thing that was really interesting, and this is
Speaker 3: probably more micro, but on Powell, I thought it was
Speaker 3: really interesting that he was that he acknowledged sort of
Speaker 3: these these base effects that we're going to start to
Speaker 3: bump up against in the second half of the year.
Speaker 3: You know, it's it's going to be a challenge for
Speaker 3: for inflation to really improve in earnest from a month
Speaker 3: on month perspective, because you're going to have these easy
Speaker 3: year ago comps, excuse me, these unfavorable year ago comps
Speaker 3: in the second half of the year. So if you
Speaker 3: think about excuse me, if you think about sort of
Speaker 3: a direction of inflation, you know, you'll continue to drift lower.
Speaker 3: I mean, here we are at what two seven or
Speaker 3: excuse me, two eight rounds up to two eight, and
Speaker 3: I think you'll get probably down to a round two
Speaker 3: four ish in the next few months. But as you
Speaker 3: roll into the second half of the year, it's going
Speaker 3: to start to accelerate again. You know, you can get
Speaker 3: easily back up to about two point seven percent after
Speaker 3: hitting two point four percent around middle of the year,
Speaker 3: just because of comps and I and one of the
Speaker 3: reasons why I love that he said that is because
Speaker 3: he's I think, you know, trying to pre empt what
Speaker 3: could be what will be a conversation around hey, but
Speaker 3: inflation is accelerating again. But again it's important to note
Speaker 3: that it's comp challenge, you know, that's and just to
Speaker 3: be clear, sorry to make sure this is abundantly clear.
Speaker 3: If you print two tents month on month between now
Speaker 3: and the end of the year, that's how those year
Speaker 3: ago comps will unfold. You'll get it down to his
Speaker 3: lowes two four, and then you can get that bounced
Speaker 3: back up to around two seven. So I like that
Speaker 3: he's sort of, you know, trying to draw attention to that.
Speaker 3: But again, yes to The short answer to your question
Speaker 3: is no, I don't think that there's anything here that
Speaker 3: will that will alter his his view on what he already.
Speaker 2: Said, and we will get that message at eleven thirty
Speaker 2: am Wall Street Time live coverage of Chairman Powell's moderated
Speaker 2: remarks at the San Francisco Fed later on this morning. Tom,
Speaker 2: thanks for being with us as we dig a little
Speaker 2: deeper into this latest inflation data. Tom Porcelli there, the
Speaker 2: chief US economist at PGIM Fixed Income, and I'm Nathan
Speaker 2: Hayger along with Bloomberg International Economics and Policy Corps. Responded
Speaker 2: Michael McKee. As we continue to get some more analysis
Speaker 2: of the PCE deflator. We're joined now by Sarah House,
Speaker 2: the senior economist at Wells Fargo. So it seems, Sarah,
Speaker 2: a bit of a mixed bag. The bumpy road to
Speaker 2: disinflation seems to continue following these numbers.
Speaker 4: Your thoughts, Yeah, I think that's right, especially when we
Speaker 4: look at inflation. So we did see some bumps in
Speaker 4: terms of the underlying movers shift around a bit. So
Speaker 4: this month we actually saw some more moderation in terms
Speaker 4: of the services side, but you did see the goods
Speaker 4: inflation pick up a little bit on a month of
Speaker 4: a month basis, which again I think just speaks to
Speaker 4: that month a month. You are going to see some
Speaker 4: volatility in these numbers, but I think overall you're still
Speaker 4: seeing signs of at least the overall trend grinding lower.
Speaker 4: But it's certainly a slow grind that we're seeing.
Speaker 1: It's Michael McKee. I'm looking at the super core number
Speaker 1: for pee. We haven't talked about that yet this morning,
Speaker 1: and on a month over a month basis, it's up
Speaker 1: by two tenths after seven tenths gained the month before.
Speaker 1: So that's probably going to make the Fed and j
Speaker 1: POL happy because they've been particularly worried about services prices.
Speaker 4: Yeah, I think that's at least one of the more
Speaker 4: encouraging developments of this morning's data in terms of the
Speaker 4: inflation trajectory. But when we think about the services side,
Speaker 4: you know, we really do need this to start shipping
Speaker 4: in more so. We've had significant goods goods disinflation over
Speaker 4: the past year. So if you look at just the
Speaker 4: change in the year of rear rates of inflation, basically
Speaker 4: two thirds of it has had two thirds of the
Speaker 4: decline has come from the good side, and so given
Speaker 4: how big a share services is, we need to see
Speaker 4: that to clerate more. So this is a good month,
Speaker 4: but the Fed's certainly going to need to see more
Speaker 4: months like this in terms of that services inflation subsiding
Speaker 4: a little bit.
Speaker 3: Well, what's the.
Speaker 2: Outlook then about whether we are going to more months
Speaker 2: like this. Something else we haven't talked about is the
Speaker 2: disruption at the port of Baltimore after the bridge collapse,
Speaker 2: and think about what effect that could have on goods
Speaker 2: inflation down the line. I mean, is that something that
Speaker 2: we can factor in at this point.
Speaker 4: I think it's really hard to put a number around
Speaker 4: what that's going to do, but I think it certainly
Speaker 4: doesn't help in terms of seeing further goods deflation or
Speaker 4: at least a still pretty low rate of goods inflation.
Speaker 4: So it's just one more hurdle. We've seen a lot
Speaker 4: of the benefits from the initial unwinding of supply chains
Speaker 4: already feed through, and we look at even before we
Speaker 4: saw this Baltimore bridge collapse, that supply chain pressures have
Speaker 4: really neutralized. So I think when we look out over
Speaker 4: the course of this year, you aren't going to see
Speaker 4: as much help coming from the goods side in terms
Speaker 4: of in terms of the core, and so again that
Speaker 4: means that services are going to have to pick up
Speaker 4: the baton and we are going to need to see
Speaker 4: more inflation coming from the services side if we're going
Speaker 4: to keep moving back towards two percent.
Speaker 2: So is there much more that the FED can do
Speaker 2: to get that services side of the equation down?
Speaker 4: I think so. They've had a lot of help in
Speaker 4: terms of the supply side on services too, when we
Speaker 4: think about the labor market and just how much we've
Speaker 4: seen labor force growth improve, and that's been a big
Speaker 4: help in terms of reducing those wage pressures. But when
Speaker 4: we look at some of the wage numbers, they're getting
Speaker 4: close to where the FED would need them to be,
Speaker 4: but not there yet, and where we still haven't hit
Speaker 4: two percent inflation, let alone on a sustained basis. I
Speaker 4: think this is going to be a waiting game. So
Speaker 4: we've already seen expectations for any easing get pushed out
Speaker 4: a little bit, and I think until we see I
Speaker 4: think more improvement on the services side, it's going to
Speaker 4: continue to be a matter of Okay, So do you
Speaker 4: get that timing of when the FED be against the
Speaker 4: cut rates start pushing back and see that even move further.
Speaker 2: So can you say at this point whether a read
Speaker 2: like this will change the equation in terms of what
Speaker 2: the FED is thinking about the rate path at this point,
Speaker 2: I mean, they've already penciled in. I think in the
Speaker 2: dot plot the median is still three. I mean, does
Speaker 2: that really change things after a reading like this.
Speaker 4: I don't think so. I mean, especially if we're focused
Speaker 4: on inflation. That came in pretty much in line. It
Speaker 4: was a touch softer for going out to two decimals,
Speaker 4: but it came on top of the upward versions of January,
Speaker 4: so it doesn't really change the picture. And at the
Speaker 4: end of the day, you still have consumers that are
Speaker 4: out there willing to spend, and so that's going to
Speaker 4: make it harder for that demand side to chip in
Speaker 4: and help drive inflation lower. As we maybe are seeing
Speaker 4: some of the supply side benefits begin to fade this year,
Speaker 4: as we have seen much more normalization and supply chains,
Speaker 4: and I think you're going to get only more incremental
Speaker 4: growth and labor supply. After two big years of labor
Speaker 4: force growth.
Speaker 1: We did see some improvement, very small improvement, but improvement
Speaker 1: in housing prices in PCE of four tenths for the
Speaker 1: month after a five tense gain last month. So I
Speaker 1: guess I would ask, partly from your national experience, Sarah,
Speaker 1: but also from being in the Charlotte area, which has
Speaker 1: been a hot real estate area, are we finally going
Speaker 1: to start to see the declines that the FED has
Speaker 1: been looking for in housing?
Speaker 4: I think there's still some room to go in terms
Speaker 4: of the housing disinflation story. So obviously that's been a
Speaker 4: big part of the stronger prints to start the year,
Speaker 4: even as again we did see a little bit more
Speaker 4: moderation in the February numbers here today. But I think
Speaker 4: when we look at everything that we're seeing in terms
Speaker 4: of the private sector measures, that there is still more
Speaker 4: disinflation in training to come in housing. I think the
Speaker 4: big question is the magnitude of how much further that falls,
Speaker 4: and of course some of the timing. So I think
Speaker 4: we feel pretty confident in the direction that it seems
Speaker 4: like Chuirpal feels pretty confident in the direction he spoke
Speaker 4: to out specifically in his press conference, but there's still
Speaker 4: a lot of questions around the timing and if it
Speaker 4: takes too long and you start to see that impulse
Speaker 4: from the downward impulse from goods deflation begin to peter out.
Speaker 4: That's going to be a contributing factor to inflation being
Speaker 4: a bit stickier as we move through this year.
Speaker 1: Well, let me circle back to one more thing before
Speaker 1: we let you go here, and that is a personal
Speaker 1: income wages and salaries up eight tenths of eight percent
Speaker 1: after just three tenths in January. Does that tell you
Speaker 1: anything in particular? Is that noise or are companies having
Speaker 1: to pay up more to attract workers with still a
Speaker 1: strong labor market.
Speaker 4: Yeah, So I think that's reflective of the fact that
Speaker 4: we did see another strong month of hiring in February,
Speaker 4: and you saw the work week pick up two So
Speaker 4: I think overall that that's reflecting that the labor market
Speaker 4: is still strong. And this is really important for the
Speaker 4: durability of consumer spending ahead. Even if it looks like
Speaker 4: consumers we're having to save a little bit less to
Speaker 4: fund their outlays here in February. But I think that's
Speaker 4: one of the bright spots in terms of seeing this
Speaker 4: economy continue to expand and deal with these higher interest rates,
Speaker 4: is if the labor market continues to chug along that
Speaker 4: that's going to be helpful for the bulk of consumers.
Speaker 2: Sarah, We're in this unusual circumstance where all this data
Speaker 2: are coming out on a holiday, the stock trading and
Speaker 2: the bond markets are both closed for Good Friday. What
Speaker 2: kind of market reaction can we expect to data like
Speaker 2: this when the market's finally open on Monday.
Speaker 4: Yeah, So I think on net this shows that the
Speaker 4: consumer is still out there spending. It's no shrinking violet,
Speaker 4: and so I think that does question how much the
Speaker 4: demand side is going to help bring inflation lower. And
Speaker 4: so I think that's maybe the most important takeaway from
Speaker 4: today's report, considering that the inflation numbers came in essentially
Speaker 4: as expected.
Speaker 2: And so what kind of do you do you expect
Speaker 2: then that we could see bond volatility when the markets
Speaker 2: reopen on Monday.
Speaker 4: Well, they'll have some time to digest this. I mean,
Speaker 4: I think it's also going to depend on what we
Speaker 4: hear from from Powell this afternoon. So we'll see if
Speaker 4: he makes waves. I think he tries. He tries not to,
Speaker 4: but I think it'll It'll be a combination of both
Speaker 4: today's numbers and what the chair has to say.
Speaker 2: Yeah, and again we are going to have those comments
Speaker 2: from Chairman Powell. Eleven thirty am Wall Street Time here
Speaker 2: on Bloomberg Radio in that moderated discussion hosted by the
Speaker 2: San Francisco FED. I asked Tom earlier, if you're expecting
Speaker 2: any change to the messaging. Do you expect that we'll
Speaker 2: hear much change from Chairman Powell after this inflation data.
Speaker 4: I don't think so, considering that, again, the inflation data
Speaker 4: was pretty much pretty much spot online with expectations going
Speaker 4: in once you mapped both the CPI and PPI data,
Speaker 4: And it hasn't been that long since since he spoke,
Speaker 4: since he spoke before, so I think we're going to
Speaker 4: continue to hear him say that they need to see
Speaker 4: more confidence that yes, they're looking for inflation to come down,
Speaker 4: to come down over time, but I think in the
Speaker 4: mediate term there's still no catalyst I think for moving
Speaker 4: imminently here.
Speaker 2: Appreciate this. Sarah, thanks for coming on with us on
Speaker 2: a market holiday. Sarah House there a senior economist at
Speaker 2: Wells Fargo. As we continue to digest this preferred inflation
Speaker 2: gauge for the Federal Reserve, the PCE deflator coming in,
Speaker 2: as you mentioned, Mike, with a little bit of a
Speaker 2: mixed bag, kind of in line on a year over
Speaker 2: year basis, but some slight cooling month over month.
Speaker 1: Yeah, it's not the kind of thing that Sarah said
Speaker 1: would change the Fed's mind. It would be considered relatively
Speaker 1: good news for the FED in terms of continued progress
Speaker 1: on inflation, but as you mentioned, continued slow and bumpy
Speaker 1: progress on inflation.
Speaker 2: Yeah, it seems like that last mile, as the Fed
Speaker 2: has been reiterating for quite some time, that last mile,
Speaker 2: is going to be quite a ways to go in
Speaker 2: terms of getting inflation back down to that two percent target.
Speaker 2: Of course, that the FED has been talking about now
Speaker 2: for months, as we've continued to watch this inflation journey
Speaker 2: go on to try to get these price pressures back
Speaker 2: under control, and again with the PCE data coming out
Speaker 2: this morning, slightly cooler than a lot of economists have
Speaker 2: been expecting, particularly on a month over month basis, when
Speaker 2: you factor in the revisions for January that had come
Speaker 2: in even bigger than expected, three tenths of one percent
Speaker 2: increase month over month on the headline pclator and a
Speaker 2: two point eight percent year over year. I'm sorry, two
Speaker 2: point five percent. For the headline, it was two point
Speaker 2: eight percent year over year when you strip out the
Speaker 2: food and energy from the PCEE deflator. You've been listening
Speaker 2: to live coverage of this economic data. The FEDS preferred
Speaker 2: inflation gauge coming in with a bit of a mixed bag.
Speaker 2: Nathan Hager alongside Bloomberg International Economics and Policy correspondent Michael McKee.
Speaker 2: Stay with us. Your top business headlines and global news
Speaker 2: stories are coming up right now.