US PCE Inflation Softer-than-Expected

Highlights

• Core PCE comes in at 0.1%, lower than the 0.2% forecast. 
• Personal Income rose 0.4%, matching the estimate. 
• Personal Spending gained 0.4%, below the 0.5% forecast. 

US Personal Income, Expenditure and Inflation Analysis, August 2023

In August, a significant highlight was the augmentation in personal income by $87.6 billion or 0.4%. The landscape of disposable personal income (DPI) also evolved, registering an increase of $46.6 billion (0.2%). This movement shadowed the personal consumption expenditures (PCE), which surged by $83.6 billion or 0.4%.

Fluctuations in Consumer Price Dynamics

The Bureau of Economic Analysis recorded the PCE price index escalating by 0.4% in the same month. An intriguing observation is the resilience of this index even after omitting volatile sectors such as food and energy, indicating a rise of 0.1%. A wider lens into the year reveals a leap of the PCE price index by 3.5%, underscoring the intrinsic inflationary pressures. It’s noteworthy that the core PCE index, after extracting the impact of food and energy, reported a subdued growth of 0.1%, contrary to the Wall Street Journal’s anticipated 0.2% climb.

Decoding Consumer Behavior and Spending Patterns

The ripple effect of the increment in personal income is observed in the consumer sphere as well. The PCE’s current-dollar surge of $83.6 billion mirrors the expansion in spending for services by $47.0 billion and goods by $36.7 billion. Distinct contributors in this realm were the housing and utilities sectors, transportation services, and a pronounced spending in the healthcare landscape.