US May Core PCE Inflation May Be Revised Lower Due to Methodology Changes
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IN SHORT
US core PCE inflation for May may be revised downward due to methodological changes by the Bureau of Economic Analysis. Goldman Sachs anticipates a potential reduction in the year-on-year increase to 3.2% from the previously estimated 3.4%. Meanwhile, Brazil's central government reported a primary deficit of 40.6 billion reais ($7.4 billion) in May, a 36.2% decrease compared to the previous year and better than market expectations.
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Key Numbers
3.2%estimated revised year-on-year US core PCE inflation
3.4%previous year-on-year US core PCE inflation estimate
40.6 billion reaisBrazil's central government primary deficit in May
$7.4 billionBrazil's central government primary deficit in May in USD
36.2%decrease in Brazil's May primary deficit compared to last year
US core PCE inflation for May may be revised lower.
Methodological changes by the Bureau of Economic Analysis are causing the potential revision.
Goldman Sachs estimates the year-on-year core PCE increase could be trimmed to 3.2%.
The previous estimate for year-on-year core PCE increase was 3.4%.
Brazil's central government posted a primary deficit in May.
The May primary deficit for Brazil was 40.6 billion reais.
Brazil's May primary deficit was 36.2% lower than the same month last year.
The May deficit exceeded market expectations.
Upcoming methodological changes by the Bureau of Economic Analysis (BEA) in how it calculates prices for certain services are expected to lead to a downward revision of the May core Personal Consumption Expenditures (PCE) inflation rate. Economists are anticipating this adjustment, with Goldman Sachs estimating that the year-on-year increase could be revised to 3.2%, down from the previously reported 3.4%. This change in calculation methodology is specific to how certain service prices are assessed.
In separate economic news, Brazil's central government registered a primary deficit of 40.6 billion reais in May. This figure represents a significant improvement, being 36.2% lower than the deficit recorded in May of the previous year. The reported deficit also surpassed market expectations, which had projected a larger shortfall for the month. The primary deficit is a measure of the government's financial balance before interest payments on its debt.
↳ Why This Matters
Upcoming methodological changes by the Bureau of Economic Analysis (BEA) in how it calculates prices for certain services are expected to lead to a downward revision of the May core Personal Consumption Expenditures (PCE) inflation rate. Economists are anticipating this adjustment, with Goldman Sachs estimating that the year-on-year increase could be revised to 3.2%, down from the previously reported 3.4%. This change in calculation methodology is specific to how certain service prices are assessed.
Frequently asked questions
The core PCE Price Index excludes volatile food and energy prices and is the Federal Reserve's primary measure of inflation.
The changes will be included in the annual revisions to gross domestic product on September 30 and will be applied retroactively to 2021.
The changes will affect the calculation of prices for portfolio management and investment advice services, legal services, and computer software and accessories.
The core PCE is the Fed's preferred inflation gauge, and a lower reading could influence its decisions on interest rates.
What Happens Next
01The BEA will implement the methodological changes as part of the annual GDP revisions on September 30.
02The revised PCE data will be applied retroactively to 2021.
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