Core PCE Inflation: Lately, gas prices and their impact on inflation have been a concern. Despite the business chatter, the Federal Reserve has positive news. The PCE index, excluding gas and food prices, has hit a two-year low.
For the year ending in August, core PCE rose 3.9%. This number is near the 2% goal inflation rate set by the Federal Reserve. It’s the smallest increase in the index in the past two years. The Commerce Department recently shared good numbers.
The core PCE measure had a slight monthly gain of 0.1%. This is the worst rise since the start of the pandemic, with a drop of 0.3% in April 2020.
Economists and analysts agree that these findings show the Fed’s efforts to control inflation are working. Since March 2022, the central bank has been raising the federal funds rate to address record-high inflation rates.
Despite rising energy prices, it’s crucial to note that these positive trends are mainly due to other factors. The PCE measure, including energy and food, increased by 0.4% from July to August and grew by 3.5% annually. Though rates are higher than announced in July, it was expected. This change was mainly due to higher gas prices last month. Between July and August, energy-related prices increased by 6.1%.
Economists predict that the PCE measure will increase by 0.5% monthly and 3.5% annually.
Some worry that higher energy prices will fuel inflation. Earlier this month, oil prices rose further due to Saudi Arabia and Russia’s commitment to reducing production.
Despite the positive core PCE measure, monitoring the current economy is crucial. With a 0.4% increase in August spending compared to a 0.9% increase in July, consumer spending has slightly slowed. Personal incomes also increased by 0.4%.
The personal saving rate, measuring savings as a share of disposable income, is declining, a concerning trend. The rate has decreased for three consecutive months, from 4.1% in July to 3.9% this month. This data shows the lowest savings since December of the previous year.
As economic pressures increase, patterns are emerging. Credit card debt is growing due to high-interest rates. Current trends: more bill non-payment, slowing job market, slowing pay growth.
When student loan payments start in October, it could have a significant impact, especially for those under 45. This age group typically has the highest income and expenses. Paying off student loans may impact financial goals like buying a house car, saving for retirement, or starting a business.
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Analysts, markets, and the Federal Reserve closely watch the monthly Personal Income and Outlays reports. They provide detailed info on prices, income, and spending. The government shutdown could disrupt economic data, making these studies more crucial.
Suppose the government shutdown on October 1 occurs. In that case, the Commerce Department’s report may be the final significant economic report until a funding deal is reached. This may leave Americans, analysts, and markets “flying blind” during a crucial financial period.
Labour market data, such as the August Job Openings and Labor Turnover Survey report and the September jobs report, may be delayed or altered due to a prolonged shutdown. There may also be delays with other economic indicators, such as home and car sales data, Census Bureau figures, PCE, and GDP figures.
While the core PCE inflation is decreasing, the economy still has some problems. Things like energy prices, how much people are spending, and the chance of a government shutdown can affect the economy. So, it’s important for officials and people who buy things to closely monitor these trends in the next few months.
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Our Reader’s Queries
What is the core PCE rate today?
Contact us by clicking the link. Previous lowest: 120.09, Actual: 120.02, Change: 15.50.
What is difference between CPI and PCE?
CPI gathers information from consumers, while PCE gathers from businesses. The scope effect occurs because CPI and PCE track different types of spending.
What is the core PCE inflation rate in 2023?
October 2023 PCE Inflation Update: Fed’s Preferred Measure Up 0.2% from Last Month; 3.5% Higher Than Last Year.
What is the core CPI for inflation?
The Core Consumer Price Index (CPI) tracks how the cost of goods and services changes over time, but it doesn’t include food and energy prices. The CPI gives us a way to see if people are spending more or less on things, and it helps us understand inflation better.