US Inflation: PCE revision seen as data clean-up – BNY
BNY Mellon’s Americas Macro Strategist John Velis argues that the upcoming PCE revision is a technical adjustment that will not alter the broader US inflation narrative. He highlights that portfolio management fees, which scaled with rising assets under management, distorted recent PCE readings versus CPI. The Bureau of Economic Analysis will shift to a labor-based methodology, improving the…
John Velis, a strategist at BNY Mellon, states that the upcoming PCE revision is merely a technical adjustment and will not significantly alter the overall US inflation story. He points out that portfolio management fees, which grew as assets under management increased, distorted recent PCE readings compared to CPI. The Bureau of Economic Analysis will transition to a labor-based methodology, enhancing the Federal Reserve's preferred inflation gauge without indicating actual disinflation.
According to Velis, the PCE revision merely cleans up the data, rather than changing the inflation narrative. The recent divergence between PCE and CPI was primarily due to a distortion caused by portfolio management fees, not a genuine surge in consumer inflation. This revision should narrow the gap between PCE and CPI, making the Federal Reserve's preferred inflation metric more dependable.
Any softer PCE figures released after the revision should be viewed as statistical corrections, not indicative of a genuine disinflationary trend.
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