US Core PCE Prices Rise by Less Than Forecast; Spending Gains

S&P Futures




Dow Futures




Nasdaq Futures




Russell 2000 Futures




Crude Oil
















10-Yr Bond




















CMC Crypto 200




FTSE 100




Nikkei 225




(Bloomberg) — A key gauge of US consumer prices posted the second-smallest increase this year while spending accelerated, offering hope that the Federal Reserve’s interest-rate hikes are cooling inflation without sparking a recession.

Most Read from Bloomberg

Musk’s Neuralink Hopes to Implant Computer in Human Brain in Six Months

An Arizona County’s Refusal to Certify Election Results Could Cost GOP a House Seat

Scientists Revive 48,500-Year-Old ‘Zombie Virus’ Buried in Ice

New York, Singapore Are the World’s Most Expensive Cities Right Now

FTX Missing Billions Remain Mystery After Bankman-Fried Grilling

The personal consumption expenditures price index excluding food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October from a month earlier, Commerce Department data showed Thursday.

From a year earlier, the gauge was up 5%, a step down from an upwardly revised 5.2% gain in September.

The overall PCE price index increased 0.3% for a third month and was up 6% from a year ago, still well above the central bank’s 2% goal.

Personal spending, adjusted for changes in prices, rose 0.5% in October, the most since the start of the year and largely reflecting a surge in outlays for merchandise.

Similar to consumer price index data last month, the report shows that while inflation is beginning to ease, it remains much too high. While a deceleration is certainly welcomed, Powell emphasized Wednesday that the US is far from price stability and that it will take “substantially more evidence” to provide comfort that inflation is actually declining.

Policymakers are expected to continue raising interest rates into next year, albeit at a slower pace, and remain restrictive for some time.

The median estimates in a Bloomberg survey of economists were for a 0.3% monthly increase in the core PCE price index and a 0.4% advance in the overall measure. Stock futures extended gains and Treasury yields fluctuated.

Spending Picks Up

Underpinned by a resilient labor market and sustained wage increases, the pickup in household spending suggests a solid start to fourth-quarter gross domestic product.

Inflation-adjusted outlays for merchandise jumped 1.1% in October, fueled by motor vehicle purchases. Spending on services climbed 0.2%, boosted by outlays for accommodation and food services.

It’s unclear, however, whether consumers will be able to maintain that momentum in 2023.

With inflation still outrunning pay gains, many households are leaning on savings, stimulus checks from some state governments, and credit cards to keep spending. And there’s growing concern that restrictive monetary policy will tip the US economy into recession.

Saving Rate Drops

The saving rate fell to 2.3% in October, the lowest since 2005, the Commerce Department report showed.

Inflation-adjusted disposable income climbed 0.4%, the most in three months. Wages and salaries, unadjusted for prices, increased 0.5%. The report also noted that the one-time payments issued by states bolstered incomes in October.

Sustained wage gains, particularly in service sectors, could keep inflation persistently higher than the Fed’s goal for an extended period, underscoring the importance of the labor market to the Fed’s decision-making in the months ahead.

Core services inflation that excludes housing and energy, a gauge Powell said Wednesday “may be the most important category for understanding the future evolution of core inflation,” moderated in October from the prior month.

Data out Friday are anticipated to show employers added another 200,000 payrolls in November, while the unemployment rate held at a historically-low level of 3.7%.

–With assistance from Matthew Boesler and Kristy Scheuble.

(Adds graphics)

Most Read from Bloomberg Businessweek

TikTok’s Viral Challenges Keep Luring Young Kids to Their Deaths

The Avatar Sequel Is a Make-or-Break Moment for Disney’s $71 Billion Fox Deal

Car Price Divergence Hints at More Painful Inflation Ahead

Global Debt Costs Are Soaring. Here’s Where It Will Hurt Most

FTX’s Collapse Validates Gary Gensler’s Crypto Skepticism

©2022 Bloomberg L.P.


What's your reaction?

In Love
Not Sure

You may also like

More in:News

Leave a reply

Your email address will not be published. Required fields are marked *