NEW YORK (Reuters) -U.S. inflation was benign in April, with retailers likely still selling inventory accumulated before the tariffs. The Personal Consumption Expenditures (PCE) Price Index rose 0.1% last month after being unchanged in March, data showed.
Consumer spending, meanwhile, which accounts for more than two-thirds of economic activity, rose 0.2% last month after an unrevised 0.7% jump in March.
MARKET REACTION:
STOCKS: U.S. stock futures pared losses after the PCE data.
BONDS: U.S. Treasury 10-year yields turned higher post-PCE.
FOREX: U.S. dollar was last down 0.3% against the yen at 143.78 yen
COMMENTS:
GENE GOLDMAN, CHIEF INVESTMENT OFFICER, CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CA
“Core PCE the Fed’s preferred measure of inflation came in a little bit mild which is the direction the fed wants to see. However, we know that tariffs tend to be deflationary at first because higher prices hurt demand, so the Fed will be more focused on the next few inflation readings for the true impact of tariffs on inflation.”
“While there were no surprises in the PCE number, markets were focusing their attention more on the U.S. China trade discussion which based on comments from Trump and Bessent seem to be hitting a roadblock.”
CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER FOR NORTHLIGHT ASSET MANAGEMENT IN CHARLOTTE (VIA EMAIL)
“We haven’t heard much from the Fed this year, and if the data continues like it has so far, then they are likely to stay in the background. This year has been all about tariff and trade policy and because there has been little in the way of inflation or unemployment surprises, the Fed has been able to stand aside and leave rates unchanged.”
“At some point the tariff uncertainty has to be addressed – and if it can be done quickly enough before damage is done to the economy, then there can be a resumption of the bull market and we can go back to all-time highs, however, if it takes too long to get clarity and the economy begins to stall, then the Fed will have no choice but to cut rates aggressively – so for those looking for rate cuts, be careful what you wish for.”
ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, BOSTON
“The economic data this morning is supportive and positive but the market overall is still trying to sort out where we are in the trade war. So we went from a place where it felt as though, you know, investors had a pretty good handle on the direction of trade and tariffs. And now that picture has become very confusing. The focus for markets right now are where exactly do we stand and how long does it take to find an exit on this trade war highway.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“We had good numbers here on the inflation front, both on a monthly basis and yearly basis, and the fact that year-to-year top line inflation is at 2.1%. That’s just a tenth of a percentage point from the Fed target.”
“So that’s good news. And in terms of personal income, that was much stronger than we expected spending in line with expectations 0.2 tenths of a percent is exactly what we were looking for. And that just simply means there’s a lot of cautiousness out there on the part of consumers.”
“Bottom line, I think this should alleviate some inflationary fears, but again the uncertainties over the trade war, which seem to be getting be worse by the day may not do justice to these numbers.”
“But we still don’t have the full effects of this trade war, you know. It’s a very confusing situation at the moment. Things change on a daily basis.”
“So I think you know that’s why I said these numbers are likely to take a backseat in terms of the markets are concerned only because we have a lot of confusion over the real status of this trade war, and that includes the inflationary aspect.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“Real personal income excluding transfer receipts – a key measure of earning power – rose 0.3% for the month, which isn’t bad at all. People chilled out from binge buying goods out of fear of tariffs to spending on services. Although the price index for durable goods shot up 0.5% for the month, the rotation into services helped push headline inflation ever closer to the Fed’s target. The market-based reading of inflation is already below the Fed’s target. Instead of worrying so much about inflation happening before job losses, the Fed might want to consider that the labor market will weaken first.”
(Compiled by the Global Finance & Markets Breaking News team)
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