2023-09-02 22:02:08
The inflation rate in the United States remained high last July, but consumers just wanted to have some fun in spending, as new data from the US Department of Commerce showed that consumer spending jumped 0.8% during the month before last, with shoppers flocking to restaurants, live shows, toys and games. And recreational equipment, which means that Americans are blocking plans to reduce inflation with more spending.
This is the strongest increase in monthly spending since last January. However, the basic data indicates that this type of activity was directly linked to an increase in borrowing rates, as the personal income and expenditure report for the month of July also showed that the Fed’s preferred measure of inflation remained high. But it grew at a monthly rate more in line with the central bank’s target of around 2%.
The personal consumption expenditures index showed that prices rose by 0.2% on a monthly basis, and 3.3% on an annual basis. 2% for the 12 months ending last July. Economists had expected monthly increases of 0.2% for the main and core indicators and 3.3% and 4.2%, respectively, for the annual figures. Analysts also linked the rise in prices to an increase in the personal consumption expenditures index.
In a recent research note, Eugenio Aleman, chief economist at the Raymond James Foundation, wrote: For the Fed, the best news from this release was the relatively large decline in the commodity price index even as commodity consumption remained strong. On the flip side, the consumption of services and the price paid for services will continue to be the biggest concern of Fed policy makers.
Goods inflation fell for the third consecutive month in July, by 0.3%, and the higher annual readings of the personal consumption expenditures indicators might be attributed to underlying effects, or comparisons to a period last year when inflation was cooling following rising to a 40-year high.
This was similarly seen in the Consumer Price Index report, for July, which saw a slight pickup in annual inflation and a more modest monthly gain of 0.2%, more in line with where the Fed would like to see inflation.
“Make no mistake,” wrote Gregory Daco, chief economist at EY, “a 0.2% rise in personal consumption expenditures is exactly what Fed policymakers are looking for to push inflation back towards the 2% target.”
A headline inflation rate of 3.3% was largely expected following Federal Reserve Chairman Jerome Powell noted that core inflation was still well above the Fed’s target of 2%, and said: “It is expected that a sustained reduction in inflation to a level of 2% will be required.” % A period of economic growth, in addition to some decline in labor market conditions.
Meanwhile, the latest data confirms how the US consumer remains resilient and continues to drive economic growth.
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