U.S. headline PCE inflation likely to have reaccelerated to 1.6 pct in July

U.S. headline PCE inflation is likely to have reaccelerated to 1.6 percent in July, reflecting a 0.1 percent rise in prices on the month, noted TD Economics in a research report. A drag from energy prices would be countered by rises in food and core categories.

“We expect a 0.1 percent rise in the core PCE index, leaving the core inflation rate stable at 1.5 percent y/y”, stated TD Economics.

By comparison, the core inflation rose 0.1 percent in July, reflecting a continued drag from cellphone services and vehicle prices. A similar gain is expected in the PCE index, with downside risk given the possible for healthcare services prices to underperform the recorded rise in the CPI, said TD Economics.

Nominal PCE is likely to have recorded a strong 0.4 percent rise in July, giving strong footing for third quarter consumer spending which is tracked just under a 3 percent annual rate. The July rise should reflect widespread increases throughout goods and services.

“We also expect a solid 0.4 percent increase in July personal income, following a flat read in the previous month that was caused by a sharp drop in dividends”, added TD Economics.

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