News & Resources

Market Analysis

Latest Insights
Press Releases
Latest Insights

Market Wire
US PCE Data Show Consumer Prices Climbing

by Adam Corbett | April 30, 2021

Consumer prices continued to edge higher in the US in March, according to the Bureau of Economic Analysis’s Price Consumption Expenditures (PCE) Index, which came in at 0.5% for the month of March or 2.3% annualized for the year.

Removing volatile food and energy prices, the core reading saw an increase of 0.4% while surveyed economists were expecting a 0.3% increase. This represents an annualized value of 1.8%, a few ticks below the Fed’s 2% inflation target.

The PCE data also revealed that personal income increased a monstrous 21.1%, month-over-month. The increase is mostly attributable to the stimulus package passed in March that included an additional round of direct payments to consumers.

This will be the third time this year that the PCE reading has beat expectations. Fed Chair Jerome Powell remained firm on the Fed’s interest rate path and QE program on Wednesday, leaving traders with the uncomfortable feeling inflation could run away – and run away quickly.

With Core CPI numbers coming out approximately 10 days prior, the PCE gauge tends to take the back seat as traders already have a handle on the data. On the other hand, the PCE index is the Fed’s preferred measure of inflation because it directly measures goods and services targeted to and consumed by individuals.

In other news, Statistics Canada released its February GDP figures, posting a 0.4% increase when polled economists were expecting a 0.5% increase. The miss had a muted impact on the loonie, largely attributable to the staleness of the release.

February’s increase follows a 0.7% increase in January and more importantly, marks the 10th consecutive month of increases in the measure. This brings the Canadian economy to within 2% of GDP reported for February 2020, a month before the pandemic rocked the world.

When you pop the hood, 14 of 20 subsectors contributed to the increase. Retail trade rebounded by 4.5% after two months of declines. Some of the hardest hit service subsectors saw healthy gains, with clothing up 23.5% and hobby, book and music stores up 28.8%.

The manufacturing sector dragged the data down, contracting 0.9% for the month after January’s 2.2% increase. This continues the trend of alternating between increases and decreases as manufacturers have struggled with forecasting demand and therefore, what inventory levels are appropriate to stockpile.

StatsCan’s preliminary GDP figures for March indicate a 0.9% increase in real GDP in that month, bringing expected Q1 GDP growth to 1.6%. Naturally, this number is likely to be revised, but it serves as a benchmark for traders to place preliminary bets.

The GDP increase follows a very hawkish tone from the Bank of Canada last week, as the Bank tapered its QE program to purchase C$3 billion of bonds per week.

While the divergence between the two North American central banks is likely to persist in the short run, the Bank of Canada cannot move markets on its own and will likely need to eventually follow suit with the Fed.

Adam Corbett
Business Development Manager, Canada & Currency Analyst

“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.

Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.

Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.

This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.

Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.

Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.

FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.

This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.

Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.

The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.

© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See for contact details.