Today's PCE Inflation Report - the Fed's favorite gauge (core PCE)

[progree]

Last edited Fri May 26, 2023, 12:39 PM - Edit history (1)

The PCE Inflation report came out today, Friday 5/26/23. On the overall inflation, April (+0.4%) was a surprise increase from March (+0.1%) (see the red bars in the below graph), while the core PCE inflation still remains high, and has not come down much in recent months -- see the blue bars.

The Federal reserve's favorite inflation gauge for projecting FUTURE inflation has been the core PCE (which is the PCE less food and energy). It's not that food and energy are unimportant, but are quite volatile from month to month. The core measure is thought to be better for projecting trends into the future.




Below is the CORE PCE inflation trend -- the rolling 3 month average and the rolling 6 month average
The 3 month rolling average had a nice little downturn because the big January increase (+0.6%) dropped out of the 3 month range


It's still stuck at a little bit more than double the Fed's 2% target.

*********LINKS
PCE News release: http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

The above shows the last 5 months. I found the latest 12 months (and way beyond) at FRED:

PCE: https://fred.stlouisfed.org/series/PCEPI
CORE PCE: https://fred.stlouisfed.org/series/PCEPILFE

The rolling 3 month and 6 month figures are calculated from the index values from the above FRED series for the CORE PCE (not from doing one digit math averages).


Consumer Price Index (CPI) released May 10

For comparison purposes, here is the most recent consumer price index graph (through April, released May 10)

CPI - https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI - http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)


Inflation measures - last 3 months annualized, thru April 2023. Up to date as of 5/26/23

. . REGULAR   CORE
PCE 3.13%     4.25%
CPI 3.21%     5.10%
PPI -0.44%     2.16% (Producer Price Index, aka Wholesale Prices)

Cooling wholesale prices should ideally be reflected in the PCE and CPI in the next month or two, but seems not to be that good of a predictor.

[mahatmakanejeeves]

1. Thanks. I'm working today, and I forgot all about it. You did a better job of this than I ever did.

I'm behind on some stuff, and I want to get it out of the way before the long weekend.

And good morning.

[progree]

2. Thanks for the kind words. I'm missing the media news report that you always supply

so which is better is probably a matter of personal preference. It is labor intensive, that's for sure (ready for my pre-lunch nap).

And good morning to you too.

Ideally I should be planting flowers today (in Minnesota we too often have a big hail storm in early- mid-May).

[mahatmakanejeeves]

4. BRDS must have a doctor's appointment or something, as she's been getting those lately.

Well, okay. I'll take a few minutes.

[bucolic_frolic]

3. PCE Personal Consumption Expenditures

That's consumer spending minus food and energy. A measure of consumers' willingness to part with their money.

[progree]

5. The PCE price index includes food and energy (just like the CPI). The CORE measures of both

are without food and energy.

(edited to add "price index" )

[progree]

6. From the Commerce Dept report on the PCE Price Index

https://www.bea.gov/news/2023/personal-income-and-outlays-april-2023

Prices

From the preceding month, the PCE price index for April increased 0.4 percent (table 9). Prices for goods increased 0.3 percent and prices for services increased 0.4 percent. Food prices decreased less than 0.1 percent, and energy prices increased 0.7 percent. Excluding food and energy, the PCE price index increased 0.4 percent. Detailed monthly PCE price indexes can be found on Table 2.4.4U.

From the same month one year ago, the PCE price index for April increased 4.4 percent (table 11). Prices for goods increased 2.1 percent and prices for services increased 5.5 percent. Food prices increased 6.9 percent and energy prices decreased 6.3 percent. Excluding food and energy, the PCE price index increased 4.7 percent from one year ago.

Actually the BEA - Bureau of Economic Analysis, which is part of the Commerce Department.

[progree]

7. Strong US consumer spending, inflation readings put Fed in tough spot

Reuters, 5/26/23
https://finance.yahoo.com/news/us-consumer-spending-beats-expectations-124730228.html

U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

... Consumer spending jumped 0.8% last month after gaining 0.1% in March. Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.

... Adjusting for inflation, consumer spending shot up 0.5% after being unchanged in March.

... [PRICES] The personal consumption expenditures (PCE) price index increased 0.4% in April after rising 0.1% in March. In the 12 months through April, the PCE price index increased 4.4% after advancing 4.2% in March. Food prices were unchanged, while the cost of energy goods and services jumped 0.7%.

Excluding the volatile food and energy components, the PCE price index was up 0.4% after a 0.3% rise in March. The so-called core PCE price index jumped 4.7% on a year-on-year basis in April after gaining 4.6% in the 12 months through March. The Fed tracks the PCE price indexes for its 2% inflation target.