Disinflationary Path Stalls As Non-Durable Goods Prices Spike But Supercore PCE Slides One of The Fed's favorite inflation indicators - Core PCE Deflator - was flat at +2.8% YoY in February (as expected) - the lowest since March 2021. However, the headline PCE Deflator stalled its disinflationary path, rising to +2.5% YoY (from +2.4%)... Source: Bloomberg Durable Goods deflation slowed and non-durable goods inflation picked up in February... Source: Bloomberg The so-called SuperCore - Services inflation ex-Shelter - remains stalled around +3.33% YoY (up 0.18% MoM)... Source: Bloomberg But SuperCore MoM tumbled significantly (as Healthcare cost inflation fell and Other Services prices deflated)... Source: Bloomberg Income and Spending both rose in February with spending far outpacing income (+0.8% MoM vs +0.3% MoM respectively)... Source: Bloomberg On a YoY basis, spending is once again outpacing income growth... Source: Bloomberg Government workers' record wage growth in January was revised lower (because we caught them)... Govt wages grew 8.1% in Feb, up from a downward revised 7.9% in Jan and below the record high of 8.9% in December Private wages grew 5.4% in Feb, up from 5.3% in Jan and back to their pre-covid growth rates As one would expect with that level of spending, the savings rate collapsed to its lowest since Dec 2022... Source: Bloomberg Here's why - government handouts rose significantly once again (+$39BN MoM)... Source: Bloomberg Finally, while the markets are exuberant at the survey-based disinflation, we do note that it's not all sunshine and unicorns. The vast majority of the reduction in inflation has been 'cyclical'... Source: Bloomberg Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs. Is The (apolitical) Fed really going to cut rates 4 times this year with a background of strong growth (GDP) and still high Acyclical inflation? Tyler Durden Fri, 03/29/2024 - 08:47