01 March 2024
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US core PCE rises the most in over a year

By Khatija Haque

US PCE inflation rose 0.3% m/m (2.4% y/y) in January, in line with market expectations but faster than in December. The core PCE, which excludes food and energy prices and is the Fed’s preferred measure of underlying inflation, rose 0.4% m/m and 2.8% y/y. While this was also in line with the consensus forecast, it was the biggest monthly rise since January last year. Housing remained a key source of inflation in January in the US, although portfolio management costs also rose sharply. Personal income rose by more than expected in January, up 1.0% m/m, but personal spending slowed to just 0.2% m/m as consumers reined in spending on durable goods, although spending on services rose. Overall, the data supports our view that Fed will wait for more convincing data on inflation before starting to lower rates.

China’s manufacturing PMI slipped to 49.1 in February from 49.2 in January but was slightly better than expected. The non-manufacturing PMI rose to 51.4 from 50.7 in January and was higher than forecast. The Caixin manufacturing PMI also improved last month to 50.9, suggesting that smaller export-oriented firms are seeing some improvement in business conditions.

Japan’s Jibun Bank manufacturing PMI was unchanged in February at 47.2, indicating contraction in the sector last month. Final PMI data for the Eurozone and US will be released later today.

Petrol prices in the UAE have increased almost 6% m/m in March for 95-Octane as both crude oil prices and refining margins increased in February. However, on an annual basis, petrol prices are down -1.7%, which will remain a drag on official CPI.

Turkey recorded real GDP growth of 4.0% y/y in Q4, stronger than the projected 3.5%. On a quarterly basis, growth was 1.0%. Q3 growth meanwhile was revised up from 5.9% y/y on the initial print to 6.1%, leaving the expansion for full-year 2023 at 4.5%. This was a slowdown from the 5.5% recorded in 2022, but was nevertheless stronger than expected given the cumulative 3,400 bps of hikes to the benchmark one-week repo rate implemented through the second half of last year. With monetary policy set to remain tight, with potential further hikes to come, the expectation is for a more marked slowdown in activity this year: the consensus forecast is for 2.8% growth.

Today’s Economic Data and Events

13:00 Eurozone Manufacturing PMI (Feb F) forecast 46.1

13:30 UK Manufacturing PMI (Feb F) forecast 47.1

14:00 Eurozone CPI (Feb P) forecast 0.6% m/m and 2.9% y/y

14:00 Eurozone unemployment rate (Jan) forecast 6.4%

18:45 US Manufacturing PMI (Feb F) forecast 51.5

19:00 US University of Michigan consumer sentiment (Feb F) forecast 79.6

19:00 US ISM Manufacturing (Feb) forecast 49.5

Fixed Income

2y and 10y treasury yield saw the biggest monthly rise in February since June and October 2023 respectively as a raft of economic data indicated that markets had been too optimistic in their expectations for early rate cuts by the Fed. While 10y yields declined slightly on Thursday to 4.25%, they had risen 34bp last month while 2y yields rose 0.41bp in February to end the month at 4.62%.

Saudi Arabia’s PIF raised USD 2bn in a 7y USD sukuk which was priced at T+85, tighter than the T+115 price initially indicated. Order books were reported at over USD 16bn. The deal follows a USD 5bn bond issue in January.


The USD index strengthened 0.2% on Thursday with the main losers being the commodity currencies. NZD lost another 0.3% against the dollar, and is down almost 2% so far this week. EUR gained 0.2% against the dollar to 1.0838 while JPY strengthened 0.4% to 150.1.


US equities rallied on Thursday despite the acceleration in the PCE inflation measures. Nasdaq100 closed 1% higher while the S&P500 gained 0.5%. European indices were mixed with the CAC40 down -0.3% but the DAX up 0.4%. Equity markets are trading higher in Asia this morning.

The DFMGI gained 0.4% on Thursday while the ADXGI closed -0.3% lower. Tadawul ASI rose 0.2%.


The EIA revised its 2023 US fuel consumption figure higher to 20.23mn b/d, the highest consumption since 2019. The agency expects fuel consumption to rise slightly to 20.39mn b/d in 2024. Both Brent and WTI closed lower yesterday at USD 83.62/b and USD 78.26/b respectively, but WTI is trading higher in Asia this morning.

Written By

Khatija Haque Head of Research & Chief Economist

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