2023-06-30 12:38:30
Inflation slowed and consumer spending remained broadly flat in real terms, according to May’s personal consumption expenditures (PCE) data. It suggested that the main driver of the US economy had begun to lose some momentum.
Key Point PCE Composite Price Index rose 0.1% month-on-month – in line with market expectations. Last month rose 0.4%. (excluding food and energy) rose 0.3% m/m – in line with market expectations;
The year-on-year growth rate of the core price index has remained at roughly the same level since late 2022.
Upper row: Trends in PCE Composite Price Index and Core Price Index (both year-on-year changes) Lower row: Real PCE (month-on-month changes)
Source: Bureau of Economic Analysis
The PCE price index is a key inflation indicator for the U.S. Federal Reserve, and the fact that it has slowed down should be welcomed by them. The price index for services, excluding housing and energy services, rose 0.2% from the previous month, the weakest increase since July last year, according to Bloomberg calculations. Compared to the same month of the previous year, it increased by 4.5%.
PCE increased by 0.1% from the previous month. Market expectations were for a 0.2% increase. April was revised downward to 0.6% increase (preliminary figure 0.8% increase).
Real PCE is almost flat. April was revised downward to 0.2% increase (preliminary figure 0.5% increase). After a sharp increase in January, real PCE remained basically at a standstill from February to May. Spending on goods fell while spending on services increased in May.
An economist’s view
The data suggests a slowdown in household spending in the second quarter, said Rubira Falqui, chief U.S. economist at High Frequency Economics.
“A slowdown in consumption growth would be welcomed by the Fed,” he said, adding: “It is unlikely to change the very near-term trajectory of monetary policy. We are committed to the view that we need to take a restrained stance,” he wrote in the report.
Bloomberg Economics’ Stuart Paul, Eliza Winger, et al. It is doubtful whether another 50 basis points (bp, 1 bp = 0.01%) hike in US interest rates, as suggested by the forecast map, is necessary.”
Real disposable income increased by 0.3% from the previous month. It was declining in April. Before adjusting for inflation, it increased by 0.4% (market expectations increased by 0.3%). Wages and salaries increased by 0.5%, the biggest increase since January this year.
The savings rate was 4.6%, the same level as in March, the highest level since January 2022. This suggests that consumers are becoming more cautious regarding spending.
See table for detailed statistics.
Original title:US Inflation Cools, Spending Stagnates as Economy Loses Steam(excerpt), US May Personal Spending Rose 0.1% M/m; Est. 0.2% (excerpt)
(Updates with additional stats and economist views)
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