PCE: Key Fed inflation gauge rose 0.4% in August behind climbing energy prices

Doug Cunningham
·3 min read
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Energy prices helped drive a 0.4% increase in consumer inflation, a key measurement tracked by the Federal Reserve. File Photo by John Angelillo/UPI
Energy prices helped drive a 0.4% increase in consumer inflation, a key measurement tracked by the Federal Reserve. File Photo by John Angelillo/UPI

Sept. 29 (UPI) -- A key inflation gauge favored by the Federal Reserve showed that consumer prices rose lower than expected in August.

The PCE, or personal consumption expenditures index, increased 0.4% in August and 3.5% compared to a year ago. Excluding volatile food and energy prices the climb was just 0.1%, a 3.9% rise from the same period last year.

Food prices rose 0.2% from July to August and 3.1% on the year, while energy prices rose 6.1% for the month but were down 3.6% from this time last year.

"The $83.6 billion increase in current-dollar PCE in August reflected a $47.0 billion increase in spending for services and a $36.7 billion increase in spending for goods," the Bureau of Economic Analysis Friday report statement said. "Within services, the largest contributors to the increase were housing and utilities (led by housing), transportation services, and health care (both hospitals and outpatient services). Within goods, the largest contributor to the increase was spending for gasoline and other energy goods."

The price of goods fell 0.2% from the following month but rose 0.8% from last August, while services prices rose 0.2% for the month and were up 0.2% yearly.

Friday's data will likely influence the Federal Reserve as it weighs its next interest rate decision. File Photo by Ken Cedeno/UPI
Friday's data will likely influence the Federal Reserve as it weighs its next interest rate decision. File Photo by Ken Cedeno/UPI

Personal income rose $87.6 billion, a 0.4% monthly rate compared to Thursday's gross domestic product report which showed that personal income increased $239.6 billion in the second quarter, driven by private wage and salary increases, assets income, personal current transfer receipts and rental income.

Real disposable income was up 3.5% in the second quarter. Personal saving was $1.04 trillion while the personal saving rate -- expressed as a percentage of disposable personal income - increased 0.7% to 5.2%.

Ahead of the inflation data, Thursday's Commerce Department report showed revised real U.S. GDP at an annual rate of 2.1% for the second quarter. Photo by John Angelillo/UPI
Ahead of the inflation data, Thursday's Commerce Department report showed revised real U.S. GDP at an annual rate of 2.1% for the second quarter. Photo by John Angelillo/UPI

Thursday's Commerce Department report showed revised real U.S. GDP at an annual rate of 2.1% for the second quarter. Real revised annual GDP was 2.2% for first quarter 2023.

"Compared to the first quarter, the deceleration in real GDP in the second quarter primarily reflected a deceleration in consumer spending, a downturn in exports, and a deceleration in federal government spending that were partly offset by an upturn in private inventory investment, an acceleration in nonresidential fixed investment, and a smaller decrease in residential investment," the Bureau of Economic Analysis said in a statement.

Revised corporate profits from current production increased $6.9 billion in the second quarter.

But profits of financial corporations decreased $54.2 billion in the second quarter, a downward revision of $6.3 billion from the previous estimate.