Goldman Sees 0.23% July Core PCE Inflation Amid Methodology Shift

Goldman Sachs has forecasted that core Personal Consumption Expenditures (PCE) prices will rise by 0.23% in July, slightly above the expected 0.22% core Consumer Price Index reading.

This projection is largely attributed to portfolio management services, which are expected to contribute 8 basis points through a 4% increase due to equity price gains during the second quarter.

The investment bank notes that asset managers providing source data for the Producer Price Index series used in PCE calculations report revenues on a quarterly basis, meaning both prior-month and prior-quarter equity returns influence measurements in the first month of each quarter.

However, July marks the final month the Bureau of Economic Analysis will use PPI data to measure portfolio management prices. The agency will shift to basing initial estimates on average hourly earnings growth for sector workers, which shows weaker correlation with equity prices.