US inflation rises less than expected in August; consumer spending surges
TLT•The PCE price index rose 0.3% in August from July and 3.4% year over year, while consumer spending surged 0.9%. Core PCE inflation rose 0.2% monthly and 3.0% annually.
1. Inflation readings
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. The index rose 3.4% year over year, matching July’s downwardly revised rate. Excluding food and energy, prices increased 0.2% for the month and 3.0% from a year earlier.
2. Methodology revisions
The Bureau of Economic Analysis changed how it calculates prices for software and accessories, portfolio management fees and legal services, and revised inflation data back to 2021. The revisions lowered the previously reported July year-over-year PCE inflation rate from 3.7% to 3.4%.
3. Spending and rates
Consumer spending increased 0.9% in August after a downwardly revised 0.1% gain in July. The Federal Reserve tracks PCE measures against its 2% inflation target. Before the data, markets priced in a roughly 51.5% chance of another rate increase in October, down from 70% on Monday; New York Fed President John Williams said Tuesday he saw “no urgency” for further action.
