An Englishman’s Take on Economic Woes Across the Pond
The anticipation is palpable as the much-esteemed Personal Consumption Expenditures (PCE) Price Index is poised for release this Friday. The Federal Reserve keeps a keen eye on this particular metric, as it serves as their preferred gauge for measuring inflation.
Inflationary Projections: Under the Microscope
Current expectations suggest a modest rise in the core PCE—excluding the volatile realms of food and energy prices—by approximately 0.3% month-over-month. This translates to an annual increase of 2.6% for core inflation and 2.4% for the headline figure. It’s crystal clear that the inflationary pressures haven’t quite let up, stubbornly remaining above the Fed’s 2% target.
The Economy: Sluggish, or Just Catching a Breath?
This week’s data from the US has been nothing less than disappointing, providing inklings of a stalling economy. Market sentiment has turned rather gloomy lately, spurred by the steep rise in US CPI. The Fear & Greed Index currently languishes at 22, a number that depicts a market dominated by trepidation. Given the extreme levels of fear, a rebound in the US stock market wouldn’t be entirely unexpected.
Interestingly, Donald Trump’s tariff jibes have reignited the US Dollar Index’s rally. The anticipation of reciprocal tariffs continuing come April 2 certainly hasn’t gone unnoticed. Tariffs aimed squarely at Mexico and Canada may commence on March 4.
A Looming Tariff Threat: Inflation and Beyond
Recent rumblings suggest that tariffs could well dent the global markets. Present concerns pivot around how they might spur inflation and dampen global growth. As inflation fears climb, Central Banks worldwide are issuing warnings about potential risks.
The US CPI was exceedingly brisk this month. Simultaneously, both Michigan consumer sentiment and CB Consumer confidence have shown marked increases in 12-month inflation expectations. All this does little to pacify consumers desperate for further rate cuts in the coming year.
From a technical perspective, the S&P 500 has undeniably waded into bearish territory, slipping below the prior lower high at 5910. Immediate support is placed at 5828 and 575, with the 200-day moving average resting firmly at 5733. Should recovery loom, resistance will be met at 5910 and 5959, with the 6000 and 6025 ranges thereafter.
For further technical insights, I recommend following the invaluable updates from Zain on Twitter/X.
Macroeconomic Data: Some Bright Spots
The US GDP figures delivered earlier this week report a 2.3% growth in the fourth quarter of 2024—its slowest in three quarters—matching prior estimates. On the upside, personal spending emerged as the foremost driver, boasting a robust 4.2% growth. Exports, imports, and government spending also played a respectful hand in the growth.
While business investments faced a steeper decline than anticipated, residential investments offered a silver lining, showing a slight uptick. For 2024 as a whole, the economy rounded off with a respectable 2.8% growth.
Final Thoughts
It’s paramount to remember, dear reader, that the forthcoming PCE data release holds considerable weight. Fed Chair Powell underscored its significance, adding another layer of anticipation for tomorrow.
With simmering tensions over tariffs and inflation, along with a market cloaked in fear, we shall have to brace ourselves for the coming days. Our transatlantic counterparts undoubtedly await these numbers with bated breath.
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