By Paul Gomme and Peter Rupert
The Bureau of Economic Analysis (BEA) announced that the personal consumption expenditures (PCE) price index increased 0.2% over the month. Using the price index numbers (found here in Table 5) of 123.378 for July and 123.187 for June, the annualized increase is 1.88%, up somewhat from the June reading of 0.73%. The year over year measure increased 2.50% in July after increasing 2.47% in June. Our trend measure increased 1.81% in July and 1.78% in June.
The Fed’s preferred measure, the PCE less food and energy (core PCE) in July increased 1.95% on an annualized basis, down slightly from the June reading of 1.97%. Our trend measure also saw a decline from June, 2.28% from 2.44%.
Inflation pressures have moderated and our preferred trend measure of core PCE inflation has been falling over the past four months. At the same time, real Personal Consumption Expenditures increased 4.62% on an annualized basis in July compared to a 3.20% increase in June. The bottom line is that inflation is now close to the Fed’s 2.0% target with seemingly no big effect on the real side of the economy. We don’t see anything in this report that should change the outlook for an upcoming rate cut.
