The Personal Consumption Expenditures price index increased 0.6% in January
Inflation appears to still be a problem for the U.S. economy.
The Personal Consumption Expenditures price index, excluding the volatile food and energy categories increased 0.6% in January and is up 4.7% from the prior year – above economists’ expectations of 0.5% and 4.4%.
The PCE index is the Federal Reserve’s preferred inflation gauge, more so than the better-known Consumer Price Index. With the increase in inflation, economists say the Fed may have to keep interest rates higher for longer.
Food prices increased 0.4% and energy prices increased 2%. Prices for goods increased 4.7% and prices for services increased 5.7%, from the same month a year ago. Food prices are up 11.1% and energy is up 9.6% compared to this time last year.
On the income side, current-dollar personal income increased 0.6%, led by an increase in compensation reflecting private wages and salaries. Government social benefits decreased in January, reflecting a decrease in the extended child tax credit as well as one-time refundable tax credits, but these were partially offset by social security’s 8.7% cost-of-living adjustment.
There was a $312.5 billion increase in current-dollar personal consumption expenditures in January reflecting increases of $162.2 billion spending for goods and $150.2 billion in spending for services. Within goods, the increase was widespread, led by motor vehicles and parts as well as other non-durable goods, led by pharmaceuticals. The largest increase in services was spending for food services.
Personal outlays increased $326.8 billion in January. Personal saving was $918.8 billion and the personal saving rate – personal saving as a percentage of disposable personal income – was 4.7%, up from 2.2% in June 2022.