The Personal Consumption Expenditures (PCE) Price Index is a key inflation gauge used by the Federal Reserve to assess the prices of goods and services consumed by households. Unlike the Consumer Price Index (CPI), the PCE adjusts for changing consumer behavior, reflecting how people shift spending as prices change. The core PCE, which excludes volatile food and energy prices, is especially watched by policymakers to understand underlying inflation trends. It’s considered a comprehensive measure of inflation and guides decisions on interest rates and monetary policy.
August PCE Price Index
The August 2024 PCE Price Index data, released on September 27, shows that the core PCE increased by 0.1% month-over-month. Meanwhile the year-over-year rate fell to 2.2%, below July’s 2.5% (lowest since 2021).
This index, a crucial measure for assessing inflation, reflects consumer price trends excluding food and energy costs. Overall, inflation appears stable, influencing Federal Reserve policy as they consider future interest rate adjustments. The result was aligned with the Federal Reserve’s view that inflation is slowing in the US economy, supporting the case for an aggressive cutting cycle by the central bank.
Service prices rose by 0.2%, while goods prices decreased 0.2%. The core PCE index, excluding food and energy, also rose 0.1%, below 0.2% in July and forecasts of 0.2%. Food prices increased 0.1% and energy prices decreased 0.8%.
Annually, the PCE inflation rate fell to 2.2%, the lowest since February 2021, from 2.5% in July, and below expectations of 2.3%. The core rate edged up to 2.7% from 2.6%, matching forecasts.
source: U.S. Bureau of Economic Analysis (BEA)
Personal Income and Outlays, August 2024
Personal income increased 0.2 percent at a monthly rate in August. Also, disposable personal income (DPI) which is personal income less personal current taxes was increased 0.2 percent. Meanwhile, personal outlays, which is the sum of personal consumption expenditures (PCE), personal interest payments, and personal current transfer payments, increased 0.2 percent and consumer spending increased 0.2 percent. Personal saving was $1.05 trillion and the personal saving rate which is personal saving as a percentage of disposable personal income was 4.8 percent in August.
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