The U.S. Department of Commerce released data on Friday (26th) showing that the U.S. personal consumption expenditures (PCE) price index in July increased by 6.3% year-on-year, lower than market expectations of 6.4%, and the previous value was 6.8%; by the Federal Reserve (Fed) The important inflation indicator, the core PCE price index excluding food and energy prices, rose 4.6% year-on-year in July, lower than market expectations of 4.7%, and the previous value of 4.8%. While consumer spending barely grew in July, inflation slowed sharply, potentially reducing the scope for the Fed to raise interest rates sharply.
On a monthly basis, the PCE price index fell by 0.1% in July, lower than the expected 0%, and the previous value was 1%. The core PCE increased by 0.1%, lower than the expected 0.3%, and the previous value was 0.6%.
The annual growth of the price index of 6.3% was lower than market expectations, but the growth rate was still at a record high in nearly 40 years. In July, the monthly growth rate of the PCE price index was -0.1%, the first decline since April 2020. Both indices slowed down.
The Fed’s most closely watched inflation gauge, the core PCE price index excluding energy and food, rose 4.6 percent in July from a year earlier, the smallest gain since October last year.
The decline in energy prices was the main reason for the slowdown in price growth in July. Compared with June, commodity prices fell 0.4%, service prices rose 0.1%, food prices rose 1.3%, and energy prices fell 4.8%.
Compared with the same period last year, commodity prices rose 9.5% in July, service prices rose 4.6%, food prices rose 11.9%, and energy prices rose 34.4%.
On the other hand, the U.S. personal income in July announced on the same day increased by 0.2% month-on-month, which is expected to be 0.6%. 0.5%, the previous value was 1.1%. Adjusted for inflation, real personal spending rose 0.2% in July, compared with an expected 0.4%. The previous value was revised down from 0.1% to 0%, the lowest level since December last year.
The Commerce Department said the increase in personal income in July was mainly due to higher wages, compared with declines in employer income, personal rental income and personal current transfer income. However, private sector and government wage growth slowed to varying degrees in July.