U.S. Consumer Spending Picks Up, PCE Core Price Index Slows Year-on-Year – Bloomberg

2023-07-28 12:37:04

In the US, key inflation indicators indicated continued easing of price pressures. Personal consumption was also active, and it became clear that the economy was gaining momentum ahead of the July-September quarter (third quarter).

Key Points U.S. Personal Consumption Expenditures (PCE) rose 0.5% month-on-month in June Economists’ median estimate rose 0.4% Personal income rose 0.3% month-on-month PCE Composite Price Index rose 0.2% month-on-month, in line with market expectations 3.0% increase compared to the same month last year, also consistent with market expectations Core price index rose 0.2% month-on-month (market expectations increased 0.2%), increased 4.1% year-on-year (expected 4.2% increase)

Inflation-adjusted real PCE increased by 0.4% from the previous month. It was the biggest increase since January.

Upper: Real PCE Lower: PCE Composite Price Index and PCE Core Price Index

Source: U.S. Bureau of Economic Analysis

Year-over-year inflation remains above the Federal Open Market Committee’s (FOMC) target, but a marked slowdown in price and wage growth over the past year has helped keep inflation in check without hurting the economy. I have high hopes that it will be possible.

Federal Reserve Chairman Jerome Powell said on Wednesday that the tightening cycle may be nearing its end. The FOMC, which ended on the same day, raised the policy interest rate to the highest level in 22 years. Several key statistics will be released before the next meeting in September.

Another piece of good news in the latest data is the service-related price index, which the Fed is closely monitoring. The price index for services, excluding housing and energy services, rose 0.2% month-on-month, the same rate as in May, according to Bloomberg calculations. Compared to the same month of the previous year, it increased by 4.1%, the smallest increase since mid-2022.

Financial conditions have tightened and prices are still rising, but a strong labor market has allowed consumers to maintain their spending capacity. Wage growth is starting to outpace inflation, easing the burden of higher prices.

Inflation-adjusted spending on goods increased by 0.9% m/m. It was the biggest increase of the year outside of January. This reflects strong demand for new trucks. Adjusted for inflation, spending on services grew modestly by 0.1%.

Bloomberg Economics’ Stuart Paul and Jonathan Church said in response to the data, “The key point for the FOMC is clear: it needs to stay tighter longer, but it will grow around the end of the year. It might lead to a slowdown,” he said.

Real disposable income, which supports personal consumption, increased by 0.2% from the previous month. Wages and salaries rose 0.6% before adjusting for inflation, the biggest gain since January. The savings rate fell to 4.3%.

See table for detailed statistics.

Original title:US Inflation Cooled While Consumer Spending Picked Up in June(excerpt)

(Adds charts, economist analysis, and statistical details)

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