After accelerating in March and April, The Fed's favorite inflation indicator - Core PCE (a measure of price changes in consumer goods and services that excludes volatile food and energy costs) - was expected to rise once again in May.

And it did with the crucial inflation signal up 0.3% MoM (as expected) and up 3.4% YoY (as expected) and at the highest level since Nov 2023...

Services costs picked up again with Durable goods flat and non-durable goods inflation decelerating...

The headline PCE jumped 0.4% MoM (slightly less than the 0.5% exp) and up 4.1% YoY (as expected) - highest since April 2023...

The impact of the war is evident in crude prices and the PCE's energy index, but arguably, this is as bad as it gets in terms of inflation...

But PCE signals that the soaring cost of semiconductors (the software and accessories component receives about 30 times the weight in PCE as it does in CPI) - has stalled...

Higher prices were met with higher spending (+0.7% MoM notional) and higher income growth (+0.7% MoM)...

Despite an upward revision to the personal savings rate every month of 2026, May was 3.0%, still lowest since 2022

With the savings rate barely above record lows, it seems that Americans are digging into their savings to keep up with inflation. No wonder sentiment is so low...

Howver, as Goldman's Rich Privorotsky notes, the challenge is that most inflation data now feels inherently backward looking, predating the collapse in oil back toward pre-conflict levels.

Given Warsh's new mantra of no forward guidance we probably should have more volatility around these releases than we have seen historically.