US Q2 2026 ISM Manufacturing PMI Flat at 52.7; Expansion Continues but Cost Inflation Hits Four-Year High

US Q1 Core PCE YoY Growth Climbs to 3.2%, Sticky Inflation Dampens Rate Cut Expectations

The latest data from the US Department of Commerce shows that the US core PCE price index YoY growth rate for Q1 2026 (March) climbed to 3.2%, matching market consensus expectations but rebounding significantly from the previous 3.0%. This data establishes the recent rebound trend in inflation and marks the highest level since the end of 2023, indicating that inflation stickiness far exceeds the market's optimistic expectations at the beginning of the year. In terms of key details, the March core PCE MoM growth rate was 0.3%, consistent with forecasts; however, the headline PCE YoY growth rate, which includes energy and food, surged to 3.5%, with a single-month increase of 0.7%, reflecting broad-based upward pressure on recent prices. Furthermore, the simultaneously released Q1 2026 annualized GDP QoQ growth rate was only 2.0%, falling short of the market expectation of 2.2%, highlighting that real economic growth momentum is slowing down. Regarding the strong rebound in inflation, financial institutions such as Advisor Perspectives and Babypips point out that the surge in global energy prices is one of the main factors driving up overall prices. Additionally, analysts further attribute that due to geopolitical concerns and potential tariff escalations, corporate front-loading of imports and inventory has significantly pushed up commodity demand and import costs, becoming a structural driving factor making it difficult for core inflation to recede. Looking ahead, in the short term (1-2 months), energy price volatility and tariff expectations will continue to keep prices at high levels. The market widely expects that the Federal Reserve (Fed) will be forced to maintain high interest rates for an extended period to cope with inflationary pressures, and the timeline for rate cuts may be significantly delayed. In the medium term (3-6 months), the risk of "Stagflation" is rising. If GDP growth remains weak and real disposable income is eroded by inflation, it will pose significant challenges to US consumer spending strength and corporate earnings in the second half of the year. Web search reference sources: https://www.advisorperspectives.com/dshort/updates/2026/04/30/core-pce-inflation-at-3-2-in-march-highest-level-since-2023 https://www.babypips.com/news/headline-usd-slides-us-core-pce-advance-gdp-stagflationary-2026-05-01 https://tradingeconomics.com/united-states/core-pce-price-index-mom