US August PCE data will be released tonight.

After the Federal Reserve restarted rate hikes in September, inflation data will become an important basis for the market to assess the subsequent interest rate path.

The market expects August headline PCE to rise 3.7% year-over-year, unchanged from the previously reported 3.7% for July; core PCE is expected to rise 3.3% year-over-year, with a month-over-month increase of 0.3%, higher than the previously reported 0.2% for July.

But this PCE release has a special factor.

The US Bureau of Economic Analysis (BEA) will adjust the measurement methods for portfolio management, computer software and accessories, and legal services, and will retroactively revise historical data since 2021.

Because historical data will be recalculated under the new methodology, some institutions expect that the revised recent core PCE year-over-year readings will be lower than previously published values.

Citi expects that recent core PCE year-over-year readings could be revised down by about 30 basis points, with a range of roughly 15 to 45 basis points; Nomura expects that after the revision, July core PCE year-over-year will be revised down by about 15 basis points to around 3.19%.

Royal Bank of Canada noted that such downward revisions stem from changes in statistical methodology and do not represent a simultaneous weakening of actual inflation pressure.

Therefore, after this data release, the market will face two sets of changes that need to be distinguished: on the one hand, whether the actual August price data meets expectations, and on the other hand, what inflation trajectory the historical series shows after revision.

The US Bureau of Economic Analysis will release the August PCE price index and the third estimate of second-quarter GDP at 8:30 PM Beijing time on September 30.

Statistical Methodology Adjustment, Core PCE May Be Revised Down

The BEA's methodology adjustment this time involves three price indicators: portfolio management, computer software and accessories, and legal services.

Among them, computer software and accessories will adopt a new combination of price data, portfolio management will adjust the method for estimating quantity indicators, and legal services will use a new source of price data.

The BEA stated that the adjustment aims to more accurately reflect the composition of related products and services.

The methodology adjustment will directly affect the historical price series.

Citi expects that recent core PCE year-over-year readings could be revised down by 15 to 45 basis points, with a median of about 30 basis points; Nomura expects that July core PCE year-over-year will be revised down from the previous 3.3% by about 15 basis points to 3.19%.

Mike Reid, head of US economics at Royal Bank of Canada, pointed out that such downward revisions mainly stem from changes in statistical methodology and do not mean that the actual price pressure consumers face has weakened in tandem.

Therefore, historical data adjustments change more the statistical trajectory of inflation indicators rather than the actual inflation environment in the current period.

Core Inflation Remains High, Rate Hike Pressure Has Not Faded

If historical revisions are viewed separately from the new August data, inflation itself remains elevated.

A FactSet survey shows that the market expects August core PCE to rise 0.3% month-over-month, higher than the previously reported 0.2% for July, with the year-over-year rate maintained at 3.3%, clearly above the Federal Reserve's 2% target.

Dan North, senior economist at Allianz Trade, believes that core inflation has not yet shown a convincing decline, and the Federal Reserve still finds it difficult to ignore this level.

Recent remarks from Federal Reserve officials have also been relatively cautious.

Federal Reserve Governor Michael Barr said that tariff shocks and Middle East conflicts have hindered the process of inflation returning to 2%, and further policy adjustments "may still be necessary."

New York Fed President John Williams said that commodity demand brought by AI infrastructure investment is also one of the factors keeping inflation persistent, but at the same time stressed that there is "no need to act hastily" and that more data is needed to judge the subsequent policy path.

This means that even if historical revisions lower the core PCE year-over-year reading, it may not change the Federal Reserve's assessment of current inflation pressure.

Consumption Remains Resilient, but the Savings Rate Continues to Decline

The August PCE report will also release data on household consumption, income, and the savings rate.

The market expects August personal consumption expenditures to rise 0.8% month-over-month, significantly higher than the previously reported 0.2% for July, with rising gasoline prices expected to push up nominal consumption.

Bank of America credit card data shows that in the week ended September 19, US consumer spending rose 6.9% year-over-year, with gasoline spending up 26.5%; excluding gasoline, spending still rose 5.7%, indicating that consumption has not cooled noticeably.

But the support behind consumption resilience is changing.

Since the start of this year, the US personal savings rate has continued to decline.

JPMorgan economists Abiel Reinhart and Michael Feroli believe that part of the decline stems from the wealth effect brought by rising stock prices, and as long as the stock market does not experience a major reversal, this factor will not pose a clear problem for the time being.

However, they also pointed out that the pace of the savings rate decline has accelerated over the past six months, which may mean that some consumers are continuing to maintain consumption in an environment of high living costs.

Once the wealth effect weakens or households further cut spending, the current resilience of consumption could face a test.

Institutional Expectations Diverge, with August Month-over-Month Data Seen as Key

After the historical data revisions, institutions still show clear differences in their judgments on the inflation trend.

Citi expects August core PCE to rise 0.29% month-over-month and 3.14% year-over-year, and expects fourth-quarter 2026 core PCE year-over-year to be about 3.1%, below the Federal Reserve's September median projection of 3.4%.

Nomura expects August core PCE to rise 0.278% month-over-month and 3.30% year-over-year, and maintains its view that the Federal Reserve will raise rates once more in December and hold off in 2027.

Goldman Sachs believes that inflation data in the coming months may show some unfavorable changes before returning to a moderate trend.

Therefore, tonight's data requires looking at both the new August data and the magnitude of historical revisions.

If August core PCE month-over-month reaches the expected 0.3%, even if the year-over-year reading declines due to historical revisions, it cannot simply be interpreted as a clear easing of current inflation pressure.

With 16 of the 18 FOMC members already expecting at least one more rate hike this year, the monthly changes in core PCE over the coming months will remain key to judging whether this policy path can continue.