U.S. Core PCE Inflation Beats Expectations Again in August

By Geoffrey Smith

Investing.com -- The Federal Reserve's preferred measure of inflation outran expectations again in August, keeping up the pressure on the central bank to continue tightening monetary policy.

The core price index for personal consumer expenditures, which is a more accurate reflection of the actual spending patterns of U.S. consumers than the Consumer Price Index, rose 0.6% on the month, after rising only 0.1% in July. Analysts had expected an increase of 0.5%.

Stripping out food and energy, core PCE inflation rose to 4.9% on the year, from an upwardly-revised 4.7% in July.

Overall PCE inflation rose more gently, by only 0.3%, owing largely to the steady decline in gasoline prices through the month, which led to overall energy prices falling 5.5% on the month. By contrast, food prices rose 0.8%, the Bureau of Economic Analysis said. As a result, the headline rate of PCE inflation fell to 6.2% from 6.4%.

Overall personal spending managed to stay fractionally ahead of inflation in the month, rising 0.4%, a rebound from a drop of 0.2% in July. That represented a downward revision from an original estimate of 0.1% gain. Personal income continued to grow at a steady pace of 0.3%, unchanged from July. Healthcare was the only sector outside transport to register a meaningful increase in spending, while spending continued to fall on durable goods such as furnishings and appliances.

Greg Daco, chief economist with EY, said via Twitter that the numbers represented a "more measured" dynamic than in previous months.