9/29/2023: Core PCE was up only 0.1% in August
The August PCE report was out this morning. PCE price index went up 0.4% and core PCE went up 0.1% MoM. Core PCE inflation is the 2% target the Fed is trying to optimize for. It’s good we are making progress here but we still need to worry if the elevated energy prices will have any second order effect on the core PCE down the road. It’s also worth noting that the August personal consumptions are growing at a much slower pace of 0.1% MoM compared to June and July. With the student loan payment restarts, higher interest rates on credit cards and the October 15th tax payment deadline, I won’t be surprised that we will see the personal consumption flat or even decline in September and October. Disposable personal income also continued the July trend and declined another inflation adjusted 0.2%. The job market is cooling and wages are stagnating. It sucks but it might be what it takes to put the inflation genie back in the bottle.