Rick Santelli: Core PCE Hits 3.3% as Durable Goods Surge 7.9% in April

Rick Santelli walked through Thursday morning’s data dump from the CME floor and the story he told was one of an economy that refuses to pick a direction. Inflation is sticky, factory orders are ripping, and the consumer is quietly stepping back. For anyone trying to time a Fed pivot, that combination matters.

Start with the number the Fed actually watches. “Core PCE year over year expected 3.3 comes out at 3.3. Last look was 3.2,” Santelli said. The April reading landed exactly on consensus, which sounds tame until you notice the direction. Core PCE has climbed from 2.61% in April 2025 to 3.29% in April 2026, and the BEA’s monthly tables show services inflation hanging at 3.49% year-over-year, basically where it has been for four months. You can read the underlying release directly on the BEA’s PCE page.

The quarterly view is where it gets uncomfortable. “The last number core PCE quarter over quarter comes in at 4.4. That’s a little bit hotter than we’re looking for. And that would be the warmest since the first quarter of 2023,” Santelli noted. A 4.4% quarterly core print forces the Fed to slow-walk the cuts the market has been pricing in. JP Morgan’s 2026 outlook had already flagged this risk, noting that markets had priced in roughly 80 basis points of rate cuts through 2026 while Fed officials are as concerned about upside risk to inflation as they are to unemployment.

The durable goods whopper

Then came the upside surprise. “On the durable goods headline number comes in at 7.9%. This is a whopper of a number. We’re expecting 4%. 7.9 would be the best since the last huge number, which was over 16% in may of 25,” Santelli said.

Aircraft orders distort this series violently, so the ex-transportation cut matters more for trend. “Once you strip out transportation, it falls to 1.1. Yes, a big drop from 7.9 to 1.1, but 1.1 still more than double what we were expecting on ex transportation,” he added. Businesses, in other words, are still ordering equipment even as households tighten up.

The consumer is the soft spot

The personal income line came in at zero growth, flat from February. The first-quarter GDP revision did not help. “It dips to 1.6. And if you look at the consumption numbers, they dipped 2/10 from 1.6 to 1.4,” Santelli said, citing the downward revision from an initial 2% estimate.

That tracks with what the household sector has been signaling for months. The savings rate has compressed from 6.2% in Q1 2024 to 3.7% in Q1 2026, which is a polite way of saying the consumer is funding spending out of buffers, not income growth.

What it means for portfolios

For retirement investors, the cross-currents argue against making big directional bets on the Fed. Goldman Sachs Research expects the Fed to reduce its policy rate by 50 basis points to 3-3.25% in 2026, but a 4.4% quarterly core PCE makes that path conditional. Vanguard’s 2026 outlook is more hawkish, arguing that solid growth and still-sticky inflation suggests that the Federal Reserve will have limited scope to cut rates below our estimated neutral rate of 3.5%.

The sector implications follow from the data itself. JP Morgan favors the enablers (industrials, utilities) and the adopters (financials, health care), calling out financials specifically for resilient earnings and differentiated catalysts like deregulation and yield curve steepening. A 7.9% durable goods print supports the industrials thesis.

Sticky services inflation supports a steeper curve, which helps banks. Rate-sensitive corners like housing remain, in JP Morgan’s word, soggy, and the Q1 GDP markdown to 1.6% says the cyclical wind is not at their back yet.

Watch the May PCE print and the next employment report. If core stays north of 3% while income growth stays at zero, the rate-cut calendar slips, and the trade Santelli’s data described, long industrial capex and short the squeezed consumer, gets a longer runway.