May 2, 2023
Core PCE rose in January: â€˜I think earnings can hang in thereâ€™
The Core Personal Consumption Expenditures (PCE) index, which is the Federal Reserve's preferred measure of inflation, rose by 0.3% in January. This is the largest monthly increase since July 2020 and is a sign that inflation may be starting to pick up.
The rise in the Core PCE index was driven by higher prices for goods and services such as healthcare, housing, and food. However, the overall PCE index, which includes volatile items such as energy and food prices, only rose by 0.2% in January.
Despite the increase in inflation, many economists believe that the rise in prices is temporary and will not have a significant impact on the economy. In fact, some experts believe that the current economic recovery will continue to be strong, and that earnings can hang in there despite the rise in inflation.
One reason for this optimism is the fact that the Federal Reserve has signaled that it will keep interest rates low for the foreseeable future. This will help to support economic growth and keep borrowing costs low for businesses and consumers.
Another factor that could help to support earnings is the ongoing rollout of COVID-19 vaccines. As more people are vaccinated and the pandemic comes under control, businesses will be able to reopen and consumers will be more willing to spend money.
Of course, there are still risks to the economic recovery. The pandemic is not yet fully under control, and there is still a risk of new variants emerging that could be more contagious or more deadly than the current strains.
In addition, there are concerns about the impact of rising inflation on consumers. If prices continue to rise, it could put a strain on household budgets and lead to a slowdown in consumer spending.
Overall, however, the rise in the Core PCE index in January is a sign that the economy is continuing to recover from the pandemic. While there are still risks and uncertainties, many economists believe that the recovery will continue to be strong, and that earnings can hang in there despite the rise in inflation.