US inflation rises less than expected in August; consumer spending surges
TLT•The PCE price index rose 0.3% in August, below economists’ 0.4% forecast, while consumer spending surged 0.9%. Year-over-year PCE inflation was 3.4%, and core PCE inflation was 3.0%.
1. Inflation data
The Personal Consumption Expenditures Price Index rose 0.3% in August after a downwardly revised 0.1% gain in July. The index increased 3.4% year over year, matching July’s downwardly revised rate. Core PCE inflation, excluding food and energy, rose 0.2% month over month and 3.0% year over year.
2. Rate expectations
The Federal Reserve tracks PCE inflation for its 2% target. Before the data, markets priced in a 51.5% chance of another rate increase next month, down from 70% on Monday; New York Fed President John Williams said Tuesday he saw “no urgency” for further action.
3. Spending picks up
Consumer spending rose 0.9% in August after a downwardly revised 0.1% gain in July. Spending accounts for more than two-thirds of economic activity, and the report said there were no signs yet of consumers significantly dialing back.
