The US published the PCE index for September on October 29 at 15:30 Moscow time. The monthly price growth turned out weaker than forecast. But annual inflation accelerated: headline to 3.6%, core to 3.1%.
What PCE is. It is the personal consumption expenditures price index. It is the one the Fed uses to measure inflation when deciding what to do with the rate. The better-known CPI is secondary for it.
Why this matters to a trader. The dollar, gold and US indices traditionally react to US inflation statistics. The move begins in the first minutes after publication.
What figures came out?
- PCE m/m: +0.3% - forecast was +0.5%, previously +0.3%
- PCE y/y: +3.6% - forecast +3.6%, previously +3.4%
- Core PCE y/y: +3.1% - forecast +3.1%, previously +3.0%
Core PCE is calculated excluding food and fuel. It shows the persistent part of price growth.
Where is the divergence from the forecast?
Only the monthly pace did not match. Prices rose +0.3% against the expected +0.5%. Both annual values came out exactly in line with the forecast.
- There is one surprise. And it is toward weaker monthly price growth.
- The annual data - no surprise. The market had already priced them in before publication.
What does this mean?
Inflation has accelerated. The annual rate rose from 3.4% to 3.6%, the core rate from 3.0% to 3.1%. The Fed's target is 2%, and the movement is so far going not toward it, but away from it.
But the monthly pace softens the picture. The trend does not break over a single month. At the same time, it is the monthly data that add up to the annual figure of the following reports.
The main point: the overall inflation picture has worsened, while the monthly reading gave the market a reason for optimism. The next US inflation releases are handy to keep at hand in the economic calendar.
What to watch next?
Four instruments are in focus after publication. These are the markets that traditionally react to US inflation statistics.
- DXY - the dollar index
- XAU/USD - gold
- S&P 500 - the broad US stock market
- Nasdaq - the technology index
If you trade indices on the news, it is worth choosing a challenge for your market in advance.
Were you holding a position at 15:30?
The release of statistics is a couple of minutes into which a week's move sometimes fits. But before catching such minutes on someone else's account, read the fine print: in some prop programs, a trade within the data publication window is considered a direct violation and the account is disabled, while in others it is a standard trading mode. Separately, look at how the daily loss limit is calculated - by closed trades or by the worst point within the day. The next inflation release will come sooner than it seems.