US inflation rises less than expected in August; consumer spending surges
SPY•The PCE price index rose 0.3% in August, below the 0.4% forecast, while consumer spending surged 0.9%. Year-over-year PCE inflation was 2.6%, and core PCE inflation was 3.0%.
1. Inflation measures
The Personal Consumption Expenditures Price Index rose 0.3% in August after a downwardly revised 0.1% gain in July; economists had forecast a 0.4% increase. Year-over-year inflation was 2.6%, down from a downwardly revised 3.4% in July. Excluding food and energy, prices rose 0.2% on the month and 3.0% over the year.
2. Spending and Fed outlook
Consumer spending rose 0.9% in August after a downwardly revised 0.1% gain in July. The Federal Reserve tracks PCE measures for its 2% inflation target and this month raised its benchmark rate to a range of 3.75%-4.00%. Before the inflation data, markets priced in a roughly 51.5% chance of another rate increase next month, down from 70% on Monday.
3. Data revisions
The Bureau of Economic Analysis changed its methodology for prices of software and accessories, portfolio management fees and legal services, and revised inflation data back to 2021.
