April 26, 2024, 09:18 AM

Economics Watch: Desjardins With Quick Take On U.S. Personal Income, Consumption and Inflation

A higher than expected core inflation reading "jarred markets" yesterday, but the details released today show a "less concerning trend", according to Royce Mendes at Desjardins on Friday.

The surprise in the quarterly core PCE inflation reading came from an upward revision to the January reading while the March data showed core price growth of just 0.3%, in line with the consensus expectation, Mendes said.

"There were concerns heading into today that March would show a sharp reacceleration in inflation. It didn't," Mendes wrote. "As a result, it seems like inflation is simply proving slightly more sticky than previously believed instead of heating back up."

But Mendes said while the core inflation data will calm some nerves, still strong spending growth in March suggests that economic momentum remained intact heading into the second quarter. As evidenced by yesterday's GDP release, he noted, American households are keeping the economy "running at a fast clip". So long as that continues, U.S. Federal Reserve officials can be very patient in assessing the timing of eventual rate reductions, Mendes added.

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