The Personal Consumption Expenditures price index rose 0.3% from the month before, resulting in an annual rate of 2.7% that matched March’s gain, according to Commerce Department data released Friday.
a closely watched inflation gauge that the Fed uses for its 2% target, rose 0.3% from the month before. On an annual basis, services inflation is running at 3.9%, while goods inflation is nearly flat at 0.1%. However, excluding the more volatile categories of food and energy, the core PCE price index slowed for the month, rising 0.2% as compared to a 0.3% gain in March. On an annual basis, the core PCE price index held steady at 2.8% for the third consecutive month. While food prices experienced a decline for the month, energy prices, specifically gas, went up by 1.2%.
Economists, by and large, weren’t expecting much of a meaningful shift in the inflation gauges. “Inflation stuck,” stated Steven Ricchiuto, US chief economist for Mizuho Securities USA. Forecasts called for the monthly and annual increases in the overall and core index to be unchanged from March, according to FactSet consensus estimates.
While inflation remained unchanged, that wasn’t the case for how Americans earned and spent. Consumer spending growth slowed, with a modest rise of 0.2% compared to the 0.7% increase in March. Disposable income gains also declined, ticking up just 0.2% versus 0.5% in March. When adjusted for inflation, both spending and disposable incomes saw a decrease for the month. Despite these fluctuations, the personal saving rate remained at 3.6%.
The weaker spending likely keeps rate cuts on the table for 2024, Michael Pearce, deputy chief US economist for Oxford Economics, noted Friday. “It will take a series of more favorable reports before the Fed feels confident enough to begin cutting interest rates,” he wrote. “With four more inflation reports to go between now and the September [Fed policymaking] meeting, we still think there is a good chance the Fed will cut rates at that meeting.”
Relevant articles:
– The Fed’s favorite inflation gauge showed little progress last month, CNN, 05/31/2024
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