Global Macro Chart of the Day (#112): Changes in US national accounts seem designed to lower inflation
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UBS examines the implications of upcoming Bureau of Economic Analysis adjustments to PCE price source data, scheduled for the September 30 annual revision. The report contends these are not merely technical noise because the targeted items align with major contributors to core PCE, specifically portfolio management and investment advisory services, along with computer software and accessories. According to estimates by Alan Detmeister, the revised source data could reduce headline PCE inflation by 21 basis points and core PCE inflation by 23 basis points.
UBS highlights that its primary concern lies not with the downward revision itself, but with the lack of methodological transparency. Insufficient disclosure of new methodology details could impair the ability of external analysts to forecast and cross-verify official inflation metrics. This opacity introduces distinct market risks while inflation remains a central policy variable.
The policy implications require careful navigation. A methodological reduction in core PCE does not equate to a genuine disappearance of demand-side or service-side inflation pressures. The Federal Reserve and market participants must distinguish between statistical base effects and actual price momentum slowing. Furthermore, because many wage negotiations and inflation-linked assets align more closely with CPI, the rates market might initially trade a dovish narrative before returning to verify true inflation stickiness.
Key exhibits
Exhibit 1
