Core inflation 3.1% compared to the previous year... 0.3% increase compared to the previous month
Nominal consumption expenditure increased by 0.5%... Real disposable income decreased by 0.3%
The rate of increase in personal consumption expenditures (PCE) prices in the United States increased in September. Although consumer spending increased, real consumption reflecting the rise in prices barely increased. Real disposable income also decreased, which weakened the purchasing power of households.
The U.S. Department of Commerce's Bureau of Economic Analysis (BEA) announced on the 29th (local time) that the September PCE price index rose 3.6% compared to the same month last year and 0.5% compared to the previous month. This is higher than the 3.4% and 0.3% in August, respectively.
The core PCE price index excluding food and energy rose 3.1% compared to the same month last year, exceeding 3.0% in August. The increase rate compared to the previous month was 0.3%. The monthly increase rate in August was revised upward from 0.2% to 0.3%, and the monthly increase was the same for the second month. The year-on-year and month-on-month growth rates of overall and core indicators were all consistent with market expectations compiled by Investing.com.
Personal consumption expenditure in September increased 0.5% from the previous month. However, the real consumption growth rate, which removes the impact of prices, decreased from 0.5% (revised value) in August to 0.0% based on rounding in September. Most of the increased spending was due to rising prices.
Income also failed to keep up with prices. Personal income and disposable income (personal income minus taxes) each increased by 0.2% compared to the previous month, but real disposable income decreased by 0.3%. The personal savings rate, which is the percentage of disposable income saved by savings, was 3.8%.
This indicator came out the day after the Federal Reserve (Fed) froze its base interest rate. The Federal Reserve maintained the federal funds rate target range at 3.75-4.00% per year at the Federal Open Market Committee (FOMC) meeting the day before. The statement assessed that the inflation rate was still high and announced that it would determine the policy stance to return prices to the target level of 2% based on additional information obtained. Director Lisa Cook and Cleveland Federal Reserve President Beth Hammack opposed the freeze decision, calling for a 0.25 percentage point increase.
The real gross domestic product (GDP) for the third quarter, announced on the same day, increased at an annual rate of 3.4% compared to the previous quarter, growing faster than the second quarter (2.2%). It also exceeded market expectations of 3.2% compiled by FXStreet. However, at the end of the quarter, in September, real consumption barely increased and real disposable income decreased, so unlike the growth trend throughout the quarter, households' spending power appears to have weakened.
The Federal Reserve raised the benchmark interest rate by 0.25 percentage points last September and then froze it in October. Whether the price rise will slow down or the slowdown in income and consumption will continue is expected to be a major variable that will affect whether to raise prices further at the next FOMC meeting.