The Federal Reserve’s favorite inflation gauge reported the biggest monthly increase in almost 17 years, according to the Bureau of Economic Analysis…(BEA)
- Y-O-Y: The PCE price index for June increased 6.8% compared to the same time last year.
- M-O-M: The PCE Index increase 1.0% from May, this was the biggest increase monthly increase since September 2005.
SWING & A MISS: Economists predicting smaller increases for the year and monthly increase at 6.7% and 0.9%, respectively.
Like in the CPI, energy prices continue to dominate with a 43.5% year-over-increase followed by food prices with an 11.5% jump in June.
- Even excluding food and energy, core PCE was still up more than expected at 4.8% (Economists had projected it would hold steady at 4.7%)
Personal spending was up more than expected in June with an 1.1% increase from May. Economists had projected a smaller 0.9% increase to start the summer. Unfortunately, income is not keeping up with inflation or spending with personal income rising 0.6% for the month on expectations of 0.5%. Unfortunately, disposable income adjusted for inflation fell 0.3%.
- The increased spending appears to be coming from savings as the personal savings rate fell to 5.2% from 10.9% at the same time last year.
Neil Irwin, of Axios, had some dire news about what these numbers mean for the economy. “For the last three months (e.g. Q2), core PCE inflation was 1.27%, which annualizes to 5.2%. Meanwhile final domestic private demand flatlined in the quarter. To me that’s pretty close to the definition of stagflation.”