US Daily Commentary

Research evidence excerpt

US Daily Commentary

d up to 2.41% in May from 2.34% in April. Given the

strength in May core PCE inflation, the wedge in y-o-y inflation between the core PCE

price index and trimmed-mean index remained large (100bp). We do not know whether

Chair Warsh or the task force on the inflation framework will put a heavy weight on PCE

trimmed-mean inflation. However, we think thewidedivergencebetweencoreinflation

andtrimmed-meaninflation highlights the importance of how to gauge the underlying

inflation trend. From the trimmed-mean inflation perspective, inflation has not accelerated

much. Considering lower crude oil prices, waning impact from tariffs, and moderating

wage growth, it seems reasonable for the Fedtoremainpatientonratehikes and assess

how inflation will evolve for some time.

Durablegoodsorders: Durable goods order fell 4.5% m-o-m in May (Nomura: -5.2%,

Consensus: -5.0%) following an upwardly revised 8.5% increase in April, primarily driven

by a sharp decline in nondefense aircraft orders.

Excluding transportation, durable goods orders rose 1.3% m-o-m (Nomura and

Consensus: 0.6%). Strength was broad-based across sectors. Core capital goods orders

(nondefense capital goods ex aircraft), a leading indicator for equipment investment, rose

1.6% m-o-m. Core capital goods shipments, an input in GDP's equipment investment,

came in slightly below expectations, rising 0.3% m-o-m (Nomura: 0.6%, Consensus:

0.5%). The durable goods report for May also highlights that business investment seems

to be broadening beyond the tech/AI sector (Fig.2).

Personalincomeandspending: Personal income grew 0.7% m-o-m (Nomura: 0.5%,

Consensus: 0.4%) in May. Compensation of employees picked up in line with our

expectation, and the April drag from farm proprietors’ income, partly related to lower