Announced this morning, the PCE Deflator increased 0.1% in August, as expected, and was up 2.2% on an annual basis, three tenths lower than the annual figure from the previous month. The Core PCE Deflator, which excludes food and energy prices and is closely monitored by the Federal Reserve for policy decisions, increased just 0.1% in August, slightly less than expected. Core rates grew 2.7% on an annual basis, one tenth above the previous month’s annual figure.
Meanwhile, Personal Income grew 0.2% in August, less than expected, and is one tenth lower than the previous month. Personal Spending grew 0.2%, slightly less than expected, and is three tenths lower than the previous month’s increase. Real Personal Spending, which accounts for inflation, increased 0.1% in August, three tenths less than the previous month’s revised figure. The personal savings rate as a percentage of disposable income was 4.8%, which included revisions higher in previous months.
Overall, the monthly headline PCE inflation measure was as expected in August, while the core rate was less than expected. Annual measures were lower for the headline measure, but slightly increased for core measure, reminding us that inflation is still not down to the Federal Reserve’s 2% target. However, if you annualize the recent monthly figures for core PCE, it is below 2%.
Income and spending were less than expected, but still increased in the month. Wages and salaries have increased so far this year, which helps. Consumers are still spending but are more selective in what they purchase per recent earnings reports. The Federal Reserve’s expected rate decreases impact on consumers will be closely watched in the coming weeks.
In all, the yield on the 10-year US Treasury ticks lower following the report and equity futures are higher as we head into the market open.
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