The GDP report was decent, as expected. The inflation components were mixed. The Employment Cost Index was less inflationary than it looks on the surface.
The 2.3% (q/q, saar) print for Q118 Real GDP Growth does not look to have contained any significant surprises. It was slightly above consensus and the Atlanta Fed model's estimate (both 2.0%), and it was above estimated longer-term trend (1.8%). But, the composition was pretty much as expected. There is little new information to add to forecasts of Q218 Real GDP Growth. Nevertheless, it was a strong showing, given the tendency for GDP Growth to slow in Q1 of a year. It should keep the Fed on a gradually tightening path at next week's FOMC Meeting (little change in the Statement, but no hike then).
The GDP and PCE Deflators were mixed. The GDP Deflator was below consensus (2.0% versus 2.2% -- q/q saar) and lower than the H217 pace ( 2.2%) The Core PCE Deflator was a bit higher than consensus (2.5% versus 2.4%). On a y/y basis, the Core PCE Deflator was 1.7% -- highest since Q117 (1.8%) but still below the 2.0% Fed target.
The Q118 Employment Cost Index sped up by more than consensus expected, rising 0.8% q/q versus 0.7% expected and 0.6% in Q417. But, the speedup is not as inflationary as it looks -- the speedup was caused primarily by an increase in sales commissions. The latter reflects improved productivity of sales people and thus is not inflationary.
The impact of commissions is broken out in the y/y data. The overall ECI rose 2.7% y/y in Q118, versus 2.6% in Q417. Excluding sales-incentive occupations, it rose 2.6% (y/y), the same as in Q417 and just a tad above the 2.5% seen in Q117. For Private Workers, the ECI rose 2.8% y/y, versus 2.6% in Q417. Excluding sales-incentive occupations, it sped up slightly to 2.7% from 2.6% in Q417.
No comments:
Post a Comment