US PCE inflation data steadied as personal spending rose

By:
on Aug 31, 2023
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  • The PCE inflation data remained steady in July.
  • The headline PCE jumped by 3.3% in July while core PCE rose to 4.2%.
  • Personal consumption continued rising in July.

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US inflation remained sticky in July, according to the latest report by the Commerce Department. The closely watched personal consumption expenditure (PCE) data rose by 0.2% in July, translating to a year-on-year gain of 3.3%. This increase was in line with what most analysts were expecting.

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Core PCE, on the other hand, rose by 0.2% MoM, leading to a year-on-year growth of 4.2%. Again, this is in line with expectations. These numbers are still significantly above the Fed’s target of 2.0%.

PCE numbers are watched closely in Wall Street since they are the Fed’s favourite inflation gauge. These numbers came a week after Jerome Powell lamented that inflation remains stubbornly high. As a result, he pledged to continue hiking rates in the coming months.

Analysts now believe that the Fed will hold interest rates steady in the upcoming meeting in September. Besides, a series of numbers published this week showed that the American economy was slowing.

For example, consumer confidence dropped in August while the economy expanded by 2.1% in Q2, down from the previous estimate of 2.4%. A report by ADP showed that the economy added just 177k jobs in August.

On a positive side, personal consumption, the biggest part of the GDP, rose by 0.6% even as personal income dropped to 0.2%. 

Looking ahead, the next data to watch will be the upcoming US non-farm payrolls (NFP) data. Economists polled by Reuters expect the data to show that the economy added 170k jobs in August while the unemployment rate remained at 3.5%. Average hourly earnings rose by 4.4% on a YoY basis.

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