LIVE MARKETS-Give PCE a chance: Friday data roundup

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GIVE PCE A CHANCE: FRIDAY DATA ROUNDUP

With the last major potential market-mover out of the way, investors heading into a long holiday weekend to for a last breather after an eventful summer.

The Commerce Department's hotly anticipated Personal Consumption Expenditures (PCE) report USPCE=ECI largely stuck the landing.

Starting with the price index - the report's most closely watched element and Powell & Co's preferred inflation yardstick - headline and core prices rose by 0.2% in July, inline with analyst expectations.

Core inflation, which excludes volatile food and energy prices, is also commonly referred to as "underlying" inflation.

Year-on-year, headline and core PCE landed at 2.5% and 2.6% respectively, cooler than anticipated and inching ever closer to the Fed's average annual 2% inflation target.

"These are good and of course they indicate that inflation has peaked and continues to move lower," said Peter Cardillo, chief market economist at Spartan Capital Securities. "Obviously we are going to get a rate cut (from the Fed) and I think that whether it's 25 or 50 (basis points), that's still debatable and that will all depend on week's employment data."

Elsewhere in the report, personal income growth came in a bit hotter than expected, rising 0.3% versus the 0.2% economists projected.

Consumer spending, which accounts for about 70% of the U.S. economy, increased by a robust 0.5%, hitting the consensus bull's eye.

"Consumption continues to move higher, and that indicates that the prospect for recession in the first six months of 2025 is at best," Cardillo adds.

And the saving rate - often viewed as a gauge of consumer expectations - dipped from 3.1% of disposable income to 2.9%, the lowest it's been since June 2022.

That last bit could be worrisome. While the saving rate is often seen as a gauge of consumer expectations, in this case it suggests that disposable income, which grew by a paltry 0.1% last month, isn't keeping up with the rising costs of .

Next, midwest factory activity contracted at a slower-than-expected page this month.

MNI Indicators' Chicago purchasing managers' index (PMI) USCPMI=ECI gained 0.8 points to land at 46.1, a less dire reading than the 45.5 analysts expected.

A PMI reading below 50 indicates monthly contraction.

On Tuesday, the Institute for Supply Management (ISM) is due to release its more comprehensive, PMI report, which is expected to show a similar easing, but still-contracting factory sector. Consensus expects a print of 47.5.

Finally, the University of Michigan (UMich) unveiled its final take on August Consumer Sentiment USUMSF=ECI, which was revised a hair higher, from its initial 67.8 reading to 67.9.

The brightest spot in the report was arguably the cool-down in -term inflation expectations.

Survey participants see inflation one year from at 2.8%, while five-year expectations stood pat at 3.0%.

(Stephen Culp)

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