The June US PCE report confirms that prices in the services sector are swinging lower again after a pretty hot first quarter.
As the composite PMI output price index continues to sit firmly within the 'normal' range at 52.5, Core PCE Less Housing prices are now following - currently at 1.8% (3 months-by-3 months basis).
Core services have also come down significantly since their recent peak (5.1% in March) and are currently growing at 3.3% (3m/3m, annualised).
Part of this improvement in underlying services inflation may be explained by cooling wage growth (below) - now at 3.2%.
And after a breif pause, housing services inflation has resumed its path towards normalcy.
From Zillow's June market report: "A housing market that for years has been defined by fast sales and few options is starting to look more like it did before the pandemic in terms of competition among buyers and their negotiating power, if not costs."
We'd argue that the same can be said for the US labour market. If so, the doves on the Fed should be in the ascendancy.
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