The Day at a Glance | May 28 2021

The Top

*Inflation in the US (PCE) increases in line with estimates during April (0.6% monthly; 3.6% annual); underlying inflation grows more than expected.

*Biden is expected to propose a $6 trillion dollar budget for the 2022 fiscal year. This would take federal spending to its highest levels since World War II: NYT.

*The ECB is expected to maintain its asset purchasing program during the summer.

*Economic indicators: Consumer confidence in Europe improves (-5.1 May vs -8.1 Apr.).

Economic environment

The most recent inflationary figures in the United States confirmed a rise in prices during April. Inflation measured through the PCE, the FED`s preferred price index in the economy, recorded a 0.6% increase during April, in line with estimates. At an annual rate, inflation set at 3.6%, slightly above estimates (3.5% e.), and was impacted by the effects of a low base comparison. The only surprise came from underlying inflation, which accelerated 0.7% monthly (vs 0.6% e.) and 3.1% annually (2.9% e.). The data reflects similar movements seen in the Consumer Price Index – made public two weeks ago – which is why the reaction among markets remained limited. Market players will stay focused on inflationary figures in the following months in order to identify if inflationary pressures are more persistent and require a change in the expectations of an acceleration of prices in the future. Other data made public showed a (-) 13.1% fall in US income, after it increased 20.9% in March due to the distribution of checks as part of the fiscal stimulus implemented by the government. The drop in April simply shows that the stimulus was not seen. Additionally, private consumption dropped (-) 0.1% m/m during April.