US Inflation Rises While Consumer Spending Disappoints, Stocks Decline
The latest economic data reveals mixed signals regarding inflation and consumer spending in the U.S.
- Annual core Personal Consumption Expenditures Index (PCE) rose to 2.8%, above the Fed's 2% target and higher than the projected 2.7%.
- Month-over-month core PCE increased by 0.4%, exceeding estimates of 0.3%.
- Inflation-adjusted consumer spending grew only 0.1%, below expectations despite personal income increasing by 0.8%.
- University of Michigan's one-year inflation projection is now at 5%, marking three consecutive months of increases.
- Fed funds futures indicate a 13% chance of an interest rate cut in May.
- Stocks reacted negatively; the S&P 500 fell up to 1.5%, forecasting its worst quarterly performance since 2023.
- The Nasdaq Composite dropped nearly 2% early in the trading session.
Analyst Bret Kenwell noted that historically, the S&P 500 performs well in mild inflationary conditions, but current market sentiment appears dismissive of historical trends.