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A closely watched U.S. inflation indicator hit its biggest annual increase in 30 years, sparking concerns that price increases will last longer than expected and ultimately hit consumer spending.
The Fed’s personal consumption expenditure price indicator for its inflation target rose 0.4% month-on-month and 4.3% year-on-year. The annual increase was the largest since 1991.
Data released by the US Department of Commerce on Friday showed that US personal spending increased by 0.8% month-on-month, following a downward revision to a decline of 0.1% in July. It was previously reported that spending in July increased by 0.3%.
Expenditure growth is driven by a surge in spending on commodities, especially food and household goods, which may reflect that people no longer use activities such as eating out and traveling due to increased health problems.
A Wells Fargo report showed that although spending (approximately two-thirds of GDP) increased in August, the downward revision to last month indicated that spending in the third quarter “only increased insignificantly.” Economists surveyed by Bloomberg predict that the quarterly data will increase by 2.2% after an increase of more than 10% in the first two periods.
The median estimate of a survey of economists conducted by Bloomberg is a 0.7% increase in total expenditure from the previous month and a 0.3% increase in the price index.
As of 11:57 in the morning in New York on Friday, the stock market was higher, the US dollar fell, and US Treasuries had barely changed.
After adjusting for inflation, spending in August also picked up after falling last month. Actual personal spending increased by 0.4% in August, which was revised down by 0.5% last month.
Inflation-adjusted service spending increased by 0.3% month-on-month, which was lower than the 0.7% increase in July. The report shows that spending on goods rose by 0.6% after falling by 2.6%.
Inflation index
Since the beginning of this year, supply has been struggling to keep up with rapidly recovering demand, and the company hopes to fill a record number of vacant positions and obtain materials needed for production. These restrictions have pushed up prices and eroded the purchasing power of Americans.
The core PCE, which excludes food and energy, rose 0.3% for the second consecutive month. This indicator rose 3.6% from the same period last year, reaching the highest level since 1991.
Federal Reserve Chairman Jerome Powell said this week that the supply chain disruption that has been increasing global inflation will eventually prove to be temporary.
“It’s hard to say how big the impact will be during this period, or how long they will last, but we do hope that we will come back and we will get through the storm,” Powell said during a virtual meeting on Wednesday. Panel events.
A senior White House official said after the report that supply chain bottlenecks related to semiconductors and transportation “seem to be more sticky than expected a quarter or two ago.” “We are paying attention to these risks, but we are encouraged by the trend line,” the official said, referring to the recent report of a slowdown in price growth from the previous month.
Another report released on Friday showed that US consumer confidence rose slightly in late September, but it was still close to the pandemic low.
Wages and savings
At the same time, personal income increased by 0.2% after a 1.1% increase in the previous month due to the advancement of the child tax credit. Wages and salaries increased by 0.5%.
Disposable personal income, or inflation-adjusted after-tax income, fell 0.3% in August.
The savings rate — which has risen for several months due to stimulus checks and increased unemployment benefits — fell from 10.1% to 9.4% in August.
(Add White House comment.)
– With the assistance of Matthew Boesler, Reade Pickert, Cécile Daurat and Scott Lanman.
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