By eFXdata — Jan 30 - 11:34 AM
Synopsis:
Both Goldman Sachs and Morgan Stanley expect soft core PCE inflation prints for December, with weakness in core goods driving the deceleration. Goldman sees core PCE at 0.16% m/m, while Morgan Stanley expects 0.17% m/m. The employment cost index (ECI) is also forecast to soften to 0.8% q/q, reflecting slowing wage growth.
Key Points:
-
Goldman Sachs:
- Core PCE: +0.16% m/m, 2.79% y/y.
- Headline PCE: +0.25% m/m, 2.55% y/y.
- Q1 inflation prints expected to be softer than last year, bringing core PCE down by 25bps by February and 48bps by April (excluding tariff effects).
-
Morgan Stanley:
- Core PCE: +0.17% m/m, driven by weak core goods inflation (electronics, fading auto price pressures).
- Headline PCE: +0.27% m/m, slightly stronger due to firm gasoline inflation.
- Employment Cost Index (ECI): +0.8% q/q, 3.7% y/y (down 0.2pp), reflecting:
- Deceleration in the Atlanta Fed’s wage tracker.
- End of unionized worker catch-up wage growth.
Conclusion:
Both Goldman and Morgan Stanley expect soft core PCE inflation, with year-over-year disinflation continuing into Q1 2025. The ECI is also set to decline, reinforcing a gradual easing of wage pressures. However, tariff-related risks remain a wildcard for the inflation outlook in the coming months.
Source:
Goldman Sachs Research/Market Commentary