July core PCE inflation rises 3.3% from a year earlier
Core PCE rose 0.2% in July and 3.3% annually, while headline PCE held at 3.7%, keeping inflation above the Fed’s target.
By David L. Chen · Senior Columnist
· 2 min read
July core PCE inflation rose 0.2% from June and 3.3% from a year earlier, according to Commerce Department data reported by CNBC and CBS News. The broader personal consumption expenditures price index also increased 0.2% for the month, leaving its annual rate at 3.7%, above the Federal Reserve’s 2% inflation objective.
The figures drew a modest market response, CNBC reported, with stock-index futures edging lower and Treasury yields rising after the release. The data add to the information Fed officials weigh when setting interest rates, although they do not establish any particular policy decision.
What did July core PCE inflation show?
Core PCE removes food and energy, categories whose prices can move sharply from month to month. It was unchanged at a 3.3% annual rate from June, CBS News reported. CNBC said the monthly and annual core readings matched its cited forecasts, while CBS News reported that economists surveyed by FactSet had expected a 3.2% annual increase.
Headline PCE includes food and energy. Its 3.7% year-on-year increase was unchanged from June, according to CBS News. CNBC reported that both the monthly and annual headline readings were 0.1 percentage point above the Dow Jones consensus.
PCE measures changes in the prices of goods and services purchased by US households. The Fed closely follows the index in its interest-rate deliberations, and policymakers generally regard the core measure as more useful for assessing underlying inflation trends, CNBC reported. Readers comparing measures should note that PCE and the consumer price index are distinct gauges, with differing construction and coverage. Inflation measurement can therefore produce different rates even when both series describe changes in consumer prices.
How did household income and spending change?
Personal income increased 0.4% in July and personal spending rose 0.2%, CNBC reported. Beneath the total, CBS News said spending on goods declined by $49.9 billion, while services spending increased by $86.2 billion.
Price movements also differed by category. Goods prices fell 0.1% in July, led in part by a 2.7% decline in gasoline and other energy-related goods and a 0.9% decrease in furnishings and long-lasting household equipment, according to CNBC. Services prices rose 0.3%, with financial services and insurance up 1.2% and housing up 0.3%.
The latest reading leaves both headline and core PCE above the Fed’s 2% goal. CBS News reported that some officials had indicated an openness to higher rates to restrain inflation, but no formal policy outcome was reported alongside the July data.
This story draws on original reporting from CNBC.
