Investing in financial products involves risk to your capital.

Close Navigation
Learn more about IBKR accounts

Fed’s Preferred Inflation Gauge Comes In Below Expectations For August, Easing Concerns About Rising Prices

Posted September 27, 2024 at 10:15 am
Michael Cohen
Benzinga

Zinger Key Points

  • Services, led by housing and financial sectors, surged $54.8 billion, driving the PCE price index up 2.2% in August.
  • Energy prices dropped 5%, helping offset rising service costs, while core PCE increased 2.7% year-over-year.

According to government data released Friday, the Personal Consumption Expenditures (PCE) Price Index increased by 2.2% in August compared to the same period last year. The reading was below the 2.3% analysts were expecting and a drop from July’s 2.5%.

The core PCE, which excludes volatile food and energy prices, was 2.7% year-over-year in August, matching analyst expectations and 0.1% higher than July’s number.

Personal Income And Outlays For August: Key Highlights

  • Personal income increased by $50.5 billion (0.2%) in August, with disposable personal income up $34.2 billion (0.2%) and personal consumption expenditures up $47.2 billion (0.2%).
  • The PCE price index rose 0.1% in August, with a 0.1% increase in core inflation excluding food and energy. Real DPI and real PCE both increased by 0.1%.
  • Goods spending decreased by $7.6 billion, while services spending surged by $54.8 billion, primarily in housing and financial services. Motor vehicle purchases saw the largest decline in goods.
  • The PCE price index is up 2.2% year-over-year, with a 2.7% increase excluding food and energy. Energy prices fell by 5%, while food prices rose by 1.1%.
  • Personal saving rate stood at 4.8%, with personal saving totaling $1.05 trillion in August. Personal outlays increased by $48.3 billion.

Market Reactions

The U.S dollar index, as tracked by the Invesco DB USD Index Bullish Fund ETF UUP, rose 0.2% after the release.

Futures on major U.S. equity indices soared in premarket trading Friday. Contracts on the S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, were 0.22% higher. Futures on the tech-heavy Nasdaq 100 rose 0.3%, while futures for the Dow Jones Industrial Average, tracked by the SPDR Dow Jones Industrial Average ETF DIA, were 0.17% higher premarket.

Services Drive Inflation Upward

In August, the key drivers of inflation primarily stemmed from an increase in the cost of services, particularly in the housing, financial services, and insurance sectors. These categories saw the most significant price growth, contributing to the overall PCE index rise. Spending on services continued to rise, reflecting both higher demand and increasing service costs. On the other hand, goods experienced a slight decline in prices, which somewhat balanced out the overall inflationary pressure.

Energy prices, particularly for gasoline and other energy-related goods, continued their downward trend in August, moderating overall inflation. Energy prices fell significantly compared to the same time last year, which helped to temper the impact of rising prices in other categories. This was in stark contrast to earlier periods when energy costs had been a more substantial inflationary driver.

Food prices saw a modest increase in August, though their contribution to inflation was relatively mild compared to other categories. The food sector’s price rise was driven mainly by off-premises consumption, such as groceries, while restaurant and dining prices remained more stable. These food price increases, while noticeable, did not have as large of an impact on overall inflation as the service sector did.

Core inflation, which excludes the volatile categories of food and energy, remained steady. This was largely due to persistent price increases in durable goods, like automobiles, and ongoing inflation in service categories. Even though goods prices decreased slightly, the overall inflationary trend was influenced by steady price pressures in essential service sectors, contributing to the sustained core inflation rate in August.

Originally Posted September 27, 2024 – Fed’s Preferred Inflation Gauge Comes In Below Expectations For August, Easing Concerns About Rising Prices

Disclosure: Benzinga

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Benzinga and is being posted with its permission. The views expressed in this material are solely those of the author and/or Benzinga and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: ETFs

Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at the Warnings and Disclosures section of your local Interactive Brokers website.

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.