U.S. August PCE: Inflation Cooled, Edging Closer to the Fed's Target
BEA
2024-09-30The U.S. Department of Commerce released data on September 27 showing that the U.S. overall PCE price index rose 2.2% YoY in August, the lowest level since February 2021, compared with expectations of 2.3% and the previous reading of 2.5%. With inflationary pressures weakening, the market is warming up to expectations of a sharp rate cut in the future.
On September 27, local time, the U.S. Bureau of Economic Analysis (BEA) released its latest PCE report:
Core PCE for August came in at an annual rate of 2%, compared to the expected reading of 2.5% and the previous reading of 2.6%.
Core PCE for August came in at a monthly rate of 0.1%, compared to the expected reading of 0.2% and the previous reading of 0.2%.
PCE for August came in at an annual rate of 2.2%, compared to the expected reading of 2.3% and the previous reading of 2.5%.
PCE for August came in at a monthly rate of 0.1%, compared to the expected reading of 0.1% and the previous reading of 0.2%.
The data indicates that the overall PCE price index in the U.S. increased by 2.2% YoY in August, marking the lowest level since February 2021, with a MoM rise of 0.1%, which aligns with market expectations. The core PCE price index also rose by 2.7% YoY, completely in line with market estimates, while the MoM growth was 0.1%, the lowest since May.
Breaking it down by components, personal income saw an increase of US$50.5 billion in August, representing a 0.2% MoM growth. Personal consumption expenditures rose by US$47.2 billion, also increasing by 0.2% MoM, with service expenditures up by US$54.8 billion and goods expenditures falling by US$7.6 billion.
In the services sector, the largest contributors to growth were housing, financial services, and insurance. Housing-related cost pressures persist, with a YoY increase of 0.5% in August, the largest rise since January. Overall service prices rose by 0.2%. In the goods sector, prices dropped by 0.2%, with the primary driver being a decrease in expenditure on new motor vehicles. Additionally, food prices increased by 0.1%, while energy prices fell by 0.8%.
In September, the Federal Reserve significantly cut interest rates by 50 basis points, officially commencing a new round of monetary easing. Given that PCE data, which is favored by the Fed as an inflation indicator, continued to show cooling in August, this is likely to bolster the Fed's confidence in further rate cuts. Following the data release, market expectations for substantial future interest rate reductions have intensified.
U.S. August PCE
