US employment cost index likely rose 0.6 pct in Q1

The US employment cost index is expected to have risen 0.6% in the first quarter. This is likely to keep the year-on-year rate weaker at 1.9%, according to Societe Generale. In the first quarter, average hourly earnings grew just 0.57%, indicating another modest growth in wages in the ECI. But the projection has to be seen with a cautious view, added Societe Generale. In Q1 2015, irregular incentive payments resulted in above-expected ECI result that led to discussions of the final arrival of the long-awaited growth in wages. But the rise was a delusion as incentive payments reversed in the second quarter last year.

Meanwhile, the CPI and PPI figures show that the headline PCE deflator might have accelerated just 0.1% last month, said Societe Generale. This might have pushed down the year-on-year rate to 0.8%. The core PCE deflator is expected to have been flat last month.

“There is a risk it prints somewhat higher and rounds up to 0.1%. Still, unless it is noticeably higher than our estimate, the yoy rate will drop from 1.7% to 1.5%”, noted Societe Generale.