Key Inflation Measure Core PCE Still Elevated at 0.5% in September

The core personal consumption expenditure price index (Core PCE prices) in the US, which exclude food and energy, rose by 0.5 percent month-over-month in September of 2022 as expected.  The annual rate, the Federal Reserve’s preferred gauge of inflation, rose to 5.1 percent from 4.9 percent, below expectations of 5.2 percent.  Federal Reserve Governor Chairman Powell reminded us at the FOMC that the Fed’s key influence or measure for inflation is the core PCE index. Food prices increased 11.9 percent
Energy prices increased 20.3 percent.

The PCE price index is closely watched since it is the preferred inflation measure of the Federal Reserve, which begun raising interest rates for the first time since the pandemic began to tamp down rising prices. The Fed has traditionally tended to focus on the PCE price index because it gives a more complete picture of consumer prices, while the public and many investors tend to be more aware of the Labor Department’s CPI figure.

The market seems to go through phases of trading on the premise that the US is at or close to, peak inflation. The shock will come if better inflation news in coming months is not coming.

Highlights

Core PCE Index September 2022

  • Core PCE +5.1% y/y vs +5.2% expected Prior 4.9% y/y
  • Core PCE +0.5% m/m vs +0.5% expected Prior +0.6% m/m
United States Core Personal Consumption Expenditure Price Index
United States Core Personal Consumption Expenditure Price Index

PCE Index September 2022

  • PCE Price Index was up 6.2% y/y vs +6.2% prior
  • PCE Price Index was up 0.3% m/m vs -0.1% prior
  • PCE Deflator (Y/Y) Aug: 6.2% (est 6.3%; prev 6.2%)
  • PCE Deflator (M/M) Aug: 0.3% (est 0.3%; prev 0.3%)
  • Core PCE Deflator (M/M) Aug: 0.5% (est 0.5%; prev 0.6%)
  • Core PCE Deflator (Y/Y) Aug: 5.1% (est 5.2%; prev 4.9%)
  • Prices for goods increased 8.1 percent
  • Prices for services increased 5.3 percent.
  • Food prices increased 11.9 percent
  • Energy prices increased 20.3 percent
  • Excluding food and energy, the PCE price index increased 5.1 percent from one year ago
  • US Personal Income Sep: 0.4% (est 0.4%; prevR 0.4%)
  • US Personal Spending Sep: 0.6% (est 0.4%; prevR 0.6%)
  • US Real Personal Spending Sep: 0.3% (est 0.2%; prevR 0.3%)

PCE Price Index

United States PCE Price Index Annual Change
United States Personal Consumption Expenditure Price Index

CPI v PCE Inflation?

The two inflation measures have different weightings. The CPI captures out-of-pocket expenditures by urban consumers. The PCE price index is broader, including spending on behalf of households, for example, employer-sponsored healthcare plans, Medicare and Medicaid. The PCE price index as a result has a heavier weight for healthcare prices. Meanwhile, housing costs account for a much bigger share of the CPI than the PCE price index.

Source: US Bureau of Economics

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