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US PCE: downside risks for September - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 30, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - Analysts at Nomura noted the the core PCE price index rose by 1.302% q-o-q ar, weaker than our expectations of 1.399% (Consensus: 1.4%).

    Key Quotes:

    "This suggests that there are some downside risks to the core PCE price index for September which will be released tomorrow. Assuming that there are no backward revisions to prior months, the core PCE price index would increase only by 0.105% m-o-m in September compared with our estimate of 0.176%. Although we think that the first two months of the third quarter were revised slightly lower, we revised down our forecast for core PCE price index for September which is now expected to increase only by 0.135% m-o-m (down from 0.176%) and 1.3% y-o-y (down from 1.4%).

    Note that the core PCE price index for the prior three months is always subject to revisions primarily owing to interim updated estimates for the PPI. At the time of annual revisions they also incorporated updated seasonal factors for the CPI. Some important components of the core PCE price index such as medical care services and air transportation are calculated based on the corresponding PPI data.

    Revisions to PPI for the prior three months are done on an interim basis and are not publicly available (the updated estimates for the fourth and fifth months are published publicly). However, the BEA uses those interim inputs to update its estimate for core PCE prices.

    Therefore, it is not clear how the core PCE price index for July and August were revised at this moment. However, given that the preliminary readings of those two months were already relatively weak, today’s quarterly data for the third quarter implies some downside risks to September’s number."
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