Services Costs Drag Fed's Favorite Inflation Signal To 3-Year Highs, Savings Rate Holds Near Lows
After accelerating in March and April, The Fed's favorite inflation indicator - Core PCE (a measure of price changes in consumer goods and services that excludes volatile food and energy costs) - was expected to rise once again in May.
And it did with the crucial inflation signal up 0.3% MoM (as expected) and up 3.4% YoY (as expected) and at the highest level since Nov 2023...
Services costs picked up again with Durable goods flat and non-durable goods inflation decelerating...
The headline PCE jumped 0.4% MoM (slightly less than the 0.5% exp) and up 4.1% YoY (as expected) - highest since April 2023...
The impact of the war is evident in crude prices and the PCE's energy index, but arguably, this is as bad as it gets in terms of inflation...
But PCE signals that the soaring cost of semiconductors (the software and accessories component receives about 30 times the weight in PCE as it does in CPI) - has stalled...
Higher prices were met with higher spending (+0.7% MoM notional) and higher income growth (+0.7% MoM)...
While Spending has been accelerating, income growth HAD been slowing but accelerated markedly last month...
...with both private sector and government workers seeing wage growth acceleration...
Spending continues to run well ahead of inflation (real personal spending up 2.1% YoY)...
Despite an upward revision to the personal savings rate every month of 2026, May was 3.0%, still lowest since 2022
With the savings rate barely above record lows, it seems that Americans are digging into their savings to keep up with inflation. No wonder sentiment is so low...
Howver, as Goldman's Rich Privorotsky notes, the challenge is that most inflation data now feels inherently backward looking, predating the collapse in oil back toward pre-conflict levels.
Given Warsh's new mantra of no forward guidance we probably should have more volatility around these releases than we have seen historically.
Badenoch blasts 'moaning' female Labour MPs over Burnham jobs 'quota'
Kemi Badenoch has told Labour women to earn a job in Andy Burnham's Cabinet instead of demanding they are handed jobs because of their gender.
The Tory leader lashed out today amid reports that female MPs are demanding the de-facto new prime minister introduce a 50:50 gender split 'quota' in his government.
Amid reports that former foreign secretary David Miliband is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister also complained that Burnham could not have 'more Milibands than women' in the top posts.
But in a scathing article in the Times today Mrs Badenoch told them to 'stop moaning' and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'.
'There are many, many reasons why you shouldn't have any Milibands in the cabinet,' she said.
'But complaining that the boys haven't given them the right jobs or that the boys are taking all the jobs, just shows that Labour's women still don't get it.'
The idea of quotas was also attacked by Baroness Jacqui Smith, Labour's Skills Minister.
Asked by Times Radio if Mr Burnham should reserve jobs for women, she said: 'No, I think what Andy Burnham should be doing is building the very best team around him to change this country.'
A letter written by the Women's Parliamentary Labour Party has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs
Amid reports that former foreign secretary David Miliband (above, right, in 2010) is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister complained that Burnham could not have 'more Milibands than women' in the top posts
But Mrs Badenoch told them to pipe down and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'
A letter written by the Women's Parliamentary Labour Party and seen by the BBC has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs after he succeeds Sir Keir Starmer.
'We are asking you to demonstrate this change from day one and address the toxicity and misogyny within our own party and government,' it said.
Labour has never had a female leader, while the Conservatives have had three, and Mrs Badenoch urged the government to follow its meritocratic example.
'If you run a meritocracy, then you do not have to worry about jobs for the boys,' she wrote.
'Every woman who is a Conservative MP, every woman who has ever won the leadership, has had to fight to get where she is.
'By contrast, Labour women are demanding guarantees from Burnham. But the truth is he doesn't have to give any guarantees.
'If none of Labour's women are prepared to get their hands dirty and challenge him for the leadership, their demands are toothless.'
'In fact, it's quite revealing that the women's parliamentary Labour Party has written to Burnham asking him to commit himself to at least 50 per cent female ministers.
'This has nothing to do with meritocracy. It is yet more of the failed identity politics that is holding back our country.'
