TD Securities’ Global Strategy Team highlights upcoming US data, expecting December core PCE to rise 0.25% month-on-month and headline PCE 0.27%, leaving annual rates at 2.9% and 2.8%. The bank also looks for Q4 GDP to slow to 2.3% annualized, with risks skewed lower if government consumption falls more than anticipated.

PCE inflation and GDP set tone

"We expect GDP to print 2.3%, while core PCE likely printed at subdued 0.25% m/m."

"PCE inflation likely accelerated in December. We expect core PCE advanced 0.25% m/m due to both stronger goods and services (cons: 0.3%). We look for supercore PCE to go essentially sideways at 0.26% m/m. Headline will be a tad stronger at 0.27% owing to an acceleration in food prices (cons: 0.3%). Our forecast translates to 2.9% and 2.8% y/y for core and headline, respectively (cons: 2.9% & 2.8%)."

"We also expect personal spending grew 0.4% m/m in December—0.1% in real terms—reflecting a moderation in consumption to end Q4 (cons: 0.3%). Both control group and food services retail sales declined in the month. We also expect personal income growth moderated to 0.2% m/m due to weak aggregate payroll income growth (cons: 0.3%)."

"GDP growth likely lost momentum in Q4, growing 2.3% q/q AR after two solid quarters (consensus: 3.0%). We expect the moderation to reflect slowing consumer spending, a sharp contraction in federal government outlays, and adverse net exports. We also expect AI-related investment to continue supporting nonresi fixed investment."

"We flag the downside risk to our forecast if government consumption declines more than we expect due to the government shutdown."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)