U.S. core PCE held flat over the year at 1.5%

Posted: Monday, January 29, 2018 - 08:59 EST

The U.S. PCE deflator for December came in at expectations of 1.7%, which was down 0.1% from the previous month.  However, the Fed’s preferred gauge for inflation, core PCE, held flat year over year at 1.5%.  Core PCE continues to track below the 2% target although it has grinded higher from the lows of 1.3% back in August of 2017.  Consumer spending continued to show strength, increasing 0.4% in December, as the strong economy boosted shopping during the holiday season.  Also positive was the uptick of 0.1% in personal income to 0.4% during the month.  Even though core inflation remains below target, the probability that the Fed raises rates in March by 25bps currently stands at 92%.

The sixth round of NAFTA negotiations conclude today with senior officials expected to make a statement on progress made over this past week.  In Davos, President Trump commented that the latest round has shown progress and potentially saw a chance for a deal.  Although President Trump will speak at his first State of the Union address on Tuesday, he indicated that there is no intent to use the platform to announce any withdrawal from NAFTA.  Flows within the Canadian corporate credit market were muted on Friday and, as a result, spread ended the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,872.87 1.18% 7.55% 7.55% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

16,239.22

0.22% 0.33%

0.33%

5.45% 4.53% 2.41% -1.64% 3.68% 4.44%

Rates:

 

Today

% Change

QTD change

YTD change

Sept 30 2016

Dec 31 2016

Mar 31 2016

June 30 2017

Sept 30  2017

Dec 31  2017

Canada 5 Year

2.091%

0.05% 0.23% 0.23% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.292% 0.05% 0.25% 0.25% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.356% 0.01% 0.09% 0.09% 1.658% 2.350% 2.302% 2.148% 2.472% 2.266%
30yr Generic Corporate A rated Spread 1.21% 0.00% 0.00% 0.00% 1.530% 1.390% 1.330% 1.210% 1.240% 1.210%
30yr All-in Corporate A rated Yield

3.566%

0.01% 0.09% 0.09% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.709% 0.05% 0.30% 0.30% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 45.624 0.811                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.