Why it’s important?

The ranges of estimates are
important in terms of market reaction because when the actual data deviates from the
expectations, it creates a surprise effect. Another
important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of
estimates, most forecasts might be clustered on the upper bound of the
range, so even if the data comes out inside the range of estimates but
on the lower bound of the range, it can still create a surprise effect.

Distribution of forecasts for PCE

PCE Y/Y

• 2.7% (3%)
• 2.6% (3%)
• 2.5% (47%) – consensus
• 2.4% (47%)

PCE M/M

• 0.4% (18%)
• 0.3% (74%) – consensus
• 0.2% (8%)

Core PCE Y/Y

• 2.8% (3%)
• 2.7% (5%)
• 2.6% (71%) – consensus
• 2.5% (21%)

Core PCE M/M

• 0.4% (4%)
• 0.3% (80%) – consensus
• 0.2% (16%)

The market will focus on the Core PCE readings. We can see that the expectations are skewed to the downside, so a higher than expected number wouldn’t be good news.