What is the distribution of forecasts for the US PCE?

The ranges of estimates are
important in terms of market reaction because when the actual data deviates from the
expectations, it creates a surprise effect. Another
important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of
estimates, most forecasts might be clustered on the upper bound of the
range, so even if the data comes out inside the range of estimates but
on the lower bound of the range, it can still create a surprise effect.

PCE Y/Y

• 2.7% (7%)
• 2.5% (73%) – consensus
• 2.4% (20%)

PCE M/M

• 0.3% (90%) – consensus
• 0.2% (10%)

Core PCE Y/Y

• 2.8% (38%)
• 2.7% (46%) – consensus
• 2.6% (8%)
• 2.5% (5%)
• 2.4% (3%)

Core PCE M/M

• 0.4% (24%)
• 0.3% (65%) – consensus
• 0.2% (11%)

The
market will focus on the Core PCE readings. We can see that the
expectations are skewed to the upside, so a lower than expected number would have a higher surprise effect. The thing with the PCE price index is that forecasters can
reliably estimate the numbers once the CPI, PPI and Import prices are out, so that makes it kind of an “old news”.

Today, note that for
the Core PCE, the numbers could get rounded up higher even though the
change might be very small. The
Core PCE YoY is expected at 2.75%, so even a 2.76% figure could get
rounded up to 2.8%. In such a case, I don’t expect the market to freak
out.

This article was written by Giuseppe Dellamotta at www.forexlive.com.