Trump’s Win Streak Snaps
PCE Inflation Report Shows Prices Rose In May
The May Personal Income and Outlays Report ended President Trump’s run of indisputably good news.
Update
The report showed that inflation ticked back up in May.
From the preceding month, the PCE price index for May increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
Percent Change in PCE Price Indexes from Month One Year Ago
From the same month one year ago, the PCE price index for May increased 2.3 percent. Excluding food and energy, the PCE price index increased 2.7 percent from one year ago.
This ends the recent disinflationary trend in consumer price inflation year on year as measured by the PCE Price Index
Month on month inflation rose as well.
The numbers do not reflect a return to hyperinflation, but rising inflation numbers are never a good look for any President.
However, it may be fairly said that the may PCE inflation rate still does not show the Liberation Day tariffs being the inflation apocalypse foretold by Jay Powell and the economically illiterate corporate media.
The report is not good news for Donald Trump, but neither is it really bad news. That will annoy corporate media no end.
Starting Point
Will tomorrow’s Personal Income And Outlays Report deliver more good news for President Trump? Certainly he has been riding a wave of good news this week.
When we look at the Cleveland Federal Reserve’s inflation nowcast (“InflationNow”), there are certainly indications that the PCE Price Index—the Federal Reserve’s preferred inflation barometer—could deliver some good news on prices.
The nowcast for May has been trending slightly down for more than a month, despite tariffs, trade wars, and corporate media pearl-clutching.
We should also note that this is true despite the Cleveland Fed projecting steadily higher inflation rates since the start of the year, before reversing for May.
The core PCE inflation rate has done largely the same thing.
What further makes the case for optimism is the fact that April’s actual PCE inflation rate year on year printed significantly lower than the nowcast at both the headline and core levels. For the past few months at least, the Cleveland Fed is guilty of projecting an inflation rate higher than what has actually been reported.
The Cleveland Fed’s tendency to shoot high on inflation is an ironic counterpoint to Jay Powell’s recent Congressional testimony, where he reiterated his religious conviction that tariffs will cause inflation and higher prices. Powell keeps repeating that economic dogma, and higher prices have yet to materialize after the Liberation Day tariffs (aside, of course, from spikes in gas and energy prices during the Twelve Day War).
If recent trends hold and year on year PCE inflation prints below the Cleveland Fed’s nowcast levels, President Trump will once again get a chance to rub Powell’s nose in the dirt while telling him over and over “I told you so!”
Will PCE inflation come in low year on year? There is, of course, no way to say with certainty but one has to like the odds!
I keep hearing the alarmed voices of corporate media in my mind, warning that Trump’s tariffs would produce huge inflation. Alternative media should seize this opportunity to compile videos of the legacy media being flat-out wrong. The comparisons between the talking-heads’ ranting and actual inflation rates should be stark enough to make people abandon corporate media outlets completely. If they are saying “up”, but reality is saying “down”, viewers should say “bye”!