Major Market Movers: Inflation Stable

All eyes were fully focused onto the United States as the Commerce Department released today the Feds' favorite inflationary indicator... the PCE, along with the income and spending data, indicating that higher gasoline prices side by side with the housing slump affected consumers' spending...

The PCE is said to be the Feds' favorite inflationary indicator when deciding the monetary policy, and just as Mr. Bernanke reported to the panel house in his testimony inflation is actually easing; indicated by the 1.9% rise in the Personal Consumption Price Index the lowest in three years. The Core PCE rose 0.1% in June the same rise in May and slightly lower than the expected 0.2% rise, and the yearly reading came at 1.9% inline with expectations and the same as the previous, and still in the feds unofficial comfortable zone between the 1.0%-2.0%.

The Personal Income for the month of June rose 0.4% the same rise in May and almost inline with the expected 0.5% rise. The Personal Spending eased as well to its lowest in nine months, rising 0.1% slightly lower than the expected 0.2% rise and the previous 0.5% rise in May, affected mostly by higher gasoline prices and the ongoing housing slump and Mortgage crisis.

The PCE figures is a relief to all market participants on the outlook to the US economy inflation is steady and remains in the feds comfortable zone, and with growth reported to be 3.4% in the second quarter, now if the feds could keep that up!!! Yet with the lower Spending that is definitely going to affect growth levels for the rest of this year, and the affect of the housing crisis that is yet to show its effect on the US economy.

The Chicago PMI was released today as well, dropping to 53.4 in July down from 60.2 last May, the expected reading was to see a slight drop to 58, and the report showed that the fall was due to a fall in new orders and production. As lower consumer demand forced companies to reduce spending, yet a surprising increase in the prices paid index was due to an increase in aluminum and nickel prices. The Construction Spending in June fell 0.3% much worse than the expected rise of 0.3% and the previous rise of 0.9% which was revised to the upside coming at 1.1%.

The US also released the Consumer Confidence, rising unexpectedly to 112.6 in July its highest since 2001 from 103.9 the previous reading and the expected 105 reading. This rise could help the US economy as if people are confident about the future of the economy then they will spend their money in it, and maybe by that they can help the Federal Bank to overcome the slowing pace in the housing market...

The data above now confirm that the current policy the federal bank is undergoing proves to be right at least for now and inflation is stabilizing now, so it is the time to concentrate on other perspectives especially a way to maintain healthy growth levels...

Crown Forex

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