The US Personal Consumption Expenditure (PCE) price index slowed in November, while spending stagnated. Amid expectations for further tightening by the Fed, previous rate hikes have been suggested to have helped contain price and demand pressures.
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Inflation-adjusted real PCE was flat from the previous month, the weakest since July. It also fell short of market expectations (up 0.1%). Service expenditure increased, mainly for eating out and accommodation, but expenditure on goods, especially new cars, fell.
November consumer price index (CPI), the PCE price index also suggested an easing of price pressures and a flatness in inflation. Although many expect inflation to fall sharply over the next year, the Fed aims to eventually reduce it to a target of 2%.
Federal Reserve Chairman Jerome Powell said at a news conference after the Federal Open Market Committee (FOMC) meeting on the 14th that he would cut interest rates until he was “convinced that inflation is slowing in a sustained manner.” He said he would not consider it, saying “it will take time.”
Wall Street investors are skeptical of Chairman Powell’s warning of prolonged high interest rates
No change in the opinion of the financial authorities
Bloomberg Economics economists Ana Wong and Eliza Winger said: “Strong wage gains and real incomes suggest that the labor market is still in a meaningful way. “It is unlikely that the Fed will withdraw its view that the funds rate will (FF) is ultimately higher. 5%.”
“It seems reasonable to assume that consumers will be more cautious, as they have already used around half of their savings during the pandemic, and the labor market has been hit hard,” said Ian Shepherdson, chief economist Pantheon Macroeconomics, in a report “The situation is softening,” he said. “It would be surprising if the first quarter of next year maintains that pace,” he said, adding that he expects consumption to expand at a strong pace in the fourth quarter.
The savings rate rose slightly to 2.4%. This is the first rise since July, but is still close to historic lows.
Inflation-adjusted spending on goods fell 0.6%, the biggest drop since February. Expenditure on services increased by 0.3%.
Rising wages and lower gas prices seem to have given many Americans money to keep spending. Adjusted for inflation, real disposable income increased by 0.3%. Adjusted for inflation, wages and salaries rose 0.5% for the second consecutive month.
In general, economists believe that the PCE price index will slow more slowly than the CPI. The Fed expects the core PCE price index to fall to around 3.5% by the end of next year.
See the table for detailed statistics.
Original title:US Core PCE Inflation Cools, Consumer Spending Misses Outlook (抜粋）
(Add and update from the 4th paragraph onwards)
