Inflation measures outperformed market expectations, according to the US Personal Consumption Expenditures (PCE) data for August. On the other hand, consumer spending also showed an increase, underscoring the continued robust spending by households amid broader price increases.
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Inflation-adjusted real PCE increased by 0.1%. The previous month was revised downward to 0.1% (preliminary figure was 0.2%).
Bloomberg Economics economists Andrew Husby and Eliza Winger said: “Given unacceptably high inflation readings, the Fed is likely to ensure a series of rate hikes, which would slow the economy. Even though,” he pointed out. “Downside risks to third-quarter gross domestic product (GDP) growth have increased as a result of the downward revision to July real PCE,” it said.
Before adjusting for inflation, personal income increased by 0.3% for the second consecutive month. Wage and salary growth slowed to 0.3%, the weakest since January. That’s a positive sign for the Fed, which is looking to slow wage growth.
Looking at real PCE, spending on goods fell for the second straight month, while spending on services increased by 0.2%. The current situation is that consumption patterns are changing from goods to services. Adjusted for inflation, PCE increased by 0.4% from the previous month (down 0.2% in the previous month).
The savings rate remained at a very low level of 3.5%.
See table for detailed statistics.
Original title:US PCE Price Index Jumps More Than Forecast While Spending Rises(excerpt)
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