US Dollar: Strong services keep inflation firm – TD Securities

TD Securities strategists expect May United States (US) core Personal Consumption Expenditures (PCE) Price Index inflation to firm, driven by services, while headline PCE is lifted by higher energy prices. They see supercore remaining strong and forecast only flat real personal spending despite nominal gains. Personal income is projected to grow modestly, still trailing spending growth.

Core PCE seen reaccelerating on services

"We expect May core PCE inflation to accelerate to 0.36% m/m (3.4% y/y), showing strong services despite weak goods prices, as tariff passthrough has largely dissipated (cons: 0.3%). Headline PCE will be higher at 0.49% m/m due to energy prices (4.1% y/y, cons: 0.5%). Our forecast assumes 0.55% m/m for supercore after a strong PPI for the month."

"We look for personal spending to grow 0.5% (cons: 0.6%), which reflects a moderation in real terms to 0.0%. Personal income likely accelerated to 0.4% (cons: 0.4%), remaining below spending growth."

"On Thursday, focus will be on PCE and spending data in the morning, as well as the 7y auction to close out the week of supply."

"Fed's Bowman, Williams and Goolsbee are also all on the docket to speak."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)