While still ticking upward, the PCE index—the Federal Reserve’s preferred measure of price increases—rose less than expected today, fueling optimism that there won’t be another resurgence in inflation.
Additionally, the report showed that consumer spending rose slightly, another positive sign that consumers are continuing to open their pocketbooks despite a hawkish Fed and some previously less positive inflation reports.
According to the data, personal incomes increased $87.6 billion (0.4% at a monthly rate) in August. Disposable personal income (DPI), personal income less personal current taxes, increased $46.6 billion (0.2%) and personal consumption expenditures (PCE) increased $83.6 billion (0.4%).
The PCE price index increased 0.4%. Excluding food and energy, the PCE price index increased 0.1%. Real DPI decreased 0.2% in August, and real PCE increased 0.1%; goods decreased 0.2% while services increased 0.2%.
The increase in current-dollar personal income in August primarily reflected increases in compensation, personal income receipts on assets, rental income of persons and proprietors’ income that were partly offset by a decrease in personal current transfer receipts.
The $83.6 billion increase in current-dollar PCE in August reflected a $47 billion increase in spending for services and a $36.7 billion increase in spending for goods. Within services, the largest contributors to the increase were housing and utilities (led by housing), transportation services and health care (both hospitals and outpatient services). Within goods, the largest contributor to the increase was spending for gasoline and other energy goods (led by motor vehicle fuels, lubricants and fluids).
Personal outlays, the sum of PCE, personal interest payments and personal current transfer payments, increased $86 billion in August. Personal saving was $794.1 billion in August, and the personal saving rate—personal saving as a percentage of disposable personal income—was 3.9%.
From the preceding month, the PCE price index for August increased 0.4%. Prices for goods increased 0.8% and prices for services increased 0.2%. Food prices increased 0.2% and energy prices increased 6.1%. Excluding food and energy, the PCE price index increased 0.1%.
From the same month one year ago, the PCE price index for August increased 3.5%. Prices for goods increased 0.7% and prices for services increased 4.9%. Food prices increased 3.1% and energy prices decreased 3.6%. Excluding food and energy, the PCE price index increased 3.9% from one year ago.
The 0.1% increase in real PCE in August reflected an increase of 0.2% in spending on services and a decrease of 0.2% in spending on goods. Within services, the leading contributors to the increase were transportation services (led by air transportation) and health care (led by hospitals and nursing homes). Within goods, the largest contributor to the decrease was motor vehicles and parts (led by new motor vehicles).