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Fed's Favorite Inflation Indicator Surges To 40 Year High In Feb As Real Spending Shrinks

Tyler Durden's Photo
by Tyler Durden
Thursday, Mar 31, 2022 - 12:37 PM

Nominal income and spending was expected to rise in February (with the former accelerating and the latter slowing from January), and they both did with Personal Incomes rising 0.5% Mom (as expected) and Spending rising 0.2% MoM (worse than expected)...

Source: Bloomberg

On the income side, Feb Private wages rose 12.6% Y/Y, up from 11.2% and highest since Sept 2021 (12.8%), while Feb Govt wages 5.5%, up from 4.9% and highest since Oct 2021 (8.75%)...

Real personal spending was expected to drop 0.2% MoM (in other words, spending is shrinking adjusted for inflation), but in fact dropped 0.4% MoM as perhaps demand destruction is showing up...

 

 

Source: Bloomberg

All of which left the personal savings rate hovering at its lowest since 2013...

Finally, and most importantly, The Fed's favorite inflation indicator - Core PCE Deflator - which was expected to rise from +5.2% YoY to +5.5% YoY in Feb. The headline PCE Deflator surged to +6.4% YoY - the highest since 1982...

Source: Bloomberg

Key contributors to the spike in PCE include 'Motor Vehicles & Parts', 'Housing', and 'Gasoline & Other Energy Goods'...

Source: Bloomberg

And bear in mind that all of this was before Putin invaded Ukraine!

Is it any wonder the market is pricing in 9 rate-hikes for the rest of the year? (and then 3 rate-cuts in 2023/24 to rescue the nation from recession)

Source: Bloomberg

Stagflation is priced in... get back to work Mr.Powell

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