Synopsis:

Morgan Stanley expects modest inflation readings for April but warns that longer-term inflation expectations remain elevated. Meanwhile, consumer sentiment continues to deteriorate, reflecting concerns about purchasing power and macro uncertainty.

Key Points:

• Personal Spending & Income:

  • Real personal spending: Expected to be flat in April.

  • Nominal spending: Forecast to rise 0.1%M.

  • Personal income: Forecast to jump 1.1%M, driven by one-time Social Security payments.

• Inflation (PCE):

  • Core PCE inflation: Expected at 0.15%M.

  • Headline PCE inflation: Seen at 0.12%M — both readings consistent with moderate disinflation.

• Consumer Sentiment (UMich):

  • 5–10-year inflation expectations: Rose to 4.6%, highest since the 1990s.

  • Consumer sentiment index: Continued to fall, now back at 2022 lows.

Conclusion:

While headline and core inflation remain contained on a monthly basis, persistently high long-term inflation expectations and declining consumer sentiment raise red flags for policymakers. The data reinforce a cautious Fed stance amid mixed signals on economic resilience and inflation psychology.