Disinflation in the US slowed down. The markets have collapsed

As in some European countries, the process of disinflation, to which Jerome Powell has recently referred, is definitely slowing down in the US. This is shown by the data from the end of the week, where after Thursday's publication the markets managed to maintain balance, so after Friday's there was a slump.

Disinflation in the US is slowing down

The US Personal Consumption Expenditure Price Index rose 0,6 percent month-on-month in January 2023, the most in seven months and following an upward revised 0,2 percent increase in December. The cost of goods rose 0,6 percent, rebounding from a 0,5 percent decline in the previous month, while services inflation was stable at 0,6 percent. Food prices rose 0,4 percent, the same as in December, and energy prices rose 2 percent after falling 3,6 percent. Excluding food and energy, the PCE price index rose 0,6 percent, faster than market expectations of 0,4 percent, suggesting inflation is increasingly rooted in the economy. The annual rate accelerated to 5,4 percent. from 5,3 percent in December.

PCE inflation rises by 4,7%

Annual base rate PCE inflationpreferred by Federal Reserve measure of inflation, rose 4,7% and beat market expectations of 4,3%, supporting signals from Fed policymakers that interest rates need to be higher for an extended period of time to contain unsustainable price increases.

US personal spending rose 1,8% m/m in January 2023, rebounding from a downward-adjusted decline of 0,1% in December and beating market expectations for an increase of 1,3%. This is the biggest increase since March 2021. Within goods, the increase was broad and led by motor vehicles and parts, as well as "other" non-durable goods (led by pharmaceuticals). Within services, expenditure on food-related services had the largest share in the growth.

At the same time, personal income in the United States increased by 2023% in January 0,6. and missed market expectations for a 1,0 percent increase. Income growth was driven by rising wages, reflecting private wages and salaries. Disposable personal income rose 2,0 percent in January.

There is a sell-off in the markets

The above information collapsed the markets, and stock indices flooded in red, falling by more than 1 percent. The American dollar also strengthened, where the exchange rate EUR / USD it retreated to the levels seen in early January. US bond yields shot up and prices fell, with 2-year US bonds now at their lowest level since 2007. The game for a 50 basis point hike in March seems to be in full swing.