U.S core PCE price index gains 0.1% in January versus 0.2% expected

U.S core PCE price index gains 0.1% in January versus 0.2% expected

  • U.S core PCE price index gains 0.1% in January versus 0.2% expected.
  • Commerce Department announces a 4.6% contraction in goods trade deficit.
  • Chicago PMI climbs to 49.0 in January versus 42.9 in December and 46.1 expected.

The U.S Bureau of Economic Analysis released its monthly report on core PCE (personal consumption expenditures) price index on Friday. The data suggested a lower than expected 0.1% increase in the index in January. While food prices posted a 0.3% gain, it was offset by a 0.7% decline in services and energy products.

In December, the Bureau had announced a 0.2% increase in the core PCE price index (excluding volatile components of food and energy goods). In the 12 months that ended in January, the PCE price index was reported to have gained 1.7% that marked the sharpest increase since December 2018. In terms of year-over-year growth, the index posted 1.5% in December. The core PCE price index, on the other hand, recorded a 1.6% increase on an annual basis versus 1.5% noted in December.

U.S Federal Reserve Prefers The Core PCE Price Index As The Inflation Measure

The U.S Federal Reserve traditionally prefers the core PCE price index as a reliable inflation measure. The index missed the 2% target set by the U.S central bank in all twelve months of 2019.

The inflation-adjusted increase in U.S consumer spending was recorded at 0.1% in January. In Q4, consumer spending accelerated at a 1.7% annualized rate versus a 3.2% gain in the third quarter. The U.S economic growth at large, printed at 2.1% in the fourth quarter that came in line with Q3. The aforementioned figures hint at consumer spending starting slow in 2020’s first quarter.

The Coronavirus driven disruptions in global business operations pushed Goldman Sachs to cut its Q1 GDP forecast earlier this week to a 1.2% pace. The estimates for the first quarter were already weighed since the largest U.S airplane manufacturer, the Boeing Company, announced a production halt of its world-popular, fuel-efficient, 737 MAX jetliner in January due to the ongoing complications with the FAA following two fatal crashes that killed 346 people.

Commerce Department Announced A 4.6% Contraction In Goods Trade Deficit

The Commerce Department also announced a 4.6% contraction in goods trade deficit on Friday to $65.5 billion recorded in January. The drop in imports was posted at 2.2% while in exports it was registered at 1.0%.

Other economic data on Friday included the Chicago PMI that surged to 49.0 in January versus 42.9 in December and 46.1 expected.

The EUR/USD currency pair dropped from a daily high of 1.1051 on Friday to a low of 1.0951. Recovering the loss later in the day, the pair closed the last week at 1.1020 level.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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