Inflation continues to slow according to March Personal Consumption Expenditures

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Published Date 4/28/2023

Yesterday the 10 year note yield increased 8 bps, this morning the 10 began -7 bps. MBS prices yesterday -16 bps, this morning +16 bps on the 5.5 FNMA coupon, for the 6.0 coupon +14 bps.

Data at 8:30 am ET; March PCE increased 0.1% month/month, year/year +4.2%, forecasts were +0.1% month/month down from +0.3% in February, year/year expected 4.2% and down from 5.1% in Feb. The core PCE expected +0.3% reported at +0.3%, year/year forecasts +4.5% increased 4.6% and unchanged from February.

March personal income expected +0.2% increased 0.3%; personal spending thought to be 0.0% and reported 0.0%.

Q1 employment cost index, estimates were +1.0%, the index +1.2%. year/year +4.8% down from +5.1% in Q4. Wages and salaries, which account for about 70% of compensation costs, increased following a revised 1.2% increase (from 1.0%). The takeaway, labor costs didn't show any meaningful signs of slowing.

All key data points leading into the FOMC meeting next week. By 9 am there was no change, the 10 year 3.45% -8 bps: FNMA 5.5 and 6.0 coupons -16 bps. If there was any doubt about what the FOMC will do next week, the data almost guarantees the Fed will increase 25 bps then imply a pause. PCE core +0.3% month/month, the second month in a row, year/year at 4.6% is still well over the 2.0% the Fed and other central banks see as the ideal.

At 9:30 am the DJIA began -72 after increasing 525 yesterday, NASDAQ -24, yesterday +287, S&P -8 from +79 yesterday. The 10 year note 3.45% -8 bps from +3.53% yesterday and unchanged from Tuesday’s close. FNMA 5.5 coupon at 9:30 am +27 bps and 22 bps better than at 9:30 am yesterday; the 6.0 coupon +17 bps and +20 bps better than 9:30 am yesterday.

At 9:45 am the April Chicago purchasing mgrs. index, the consensus was 43.5 from 43.8, the index increased to 48.6 the highest index since August 2022.

Finally today, the April U. of Michigan consumer sentiment index, forecasts were the index at 63.5, as reported 63.5.

Source: TBWS

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