The U.S. Commerce Department's latest report, released Thursday, sheds light on September's personal income and spending figures, incorporating the Federal Reserve's favored indicators of consumer price inflation.
The personal consumption expenditures (PCE) price index experienced a slight rise, increasing by 0.2% in September after a 0.1% increase in August, aligning with economists' expectations. This uptick is attributed primarily to a 0.3% rise in services prices, which outweighed a minor 0.1% decline in goods prices.
According to the report, energy prices notably decreased by 2.0%, while food prices saw a 0.4% increase. Annually, the PCE price index's growth rate decelerated to 2.1% in September from 2.3% in August, meeting projections. A year-over-year comparison reveals a 1.2% drop in goods prices, juxtaposed with a significant 3.7% rise in services prices.
Focusing on the core PCE price index, which omits food and energy prices, there was a 0.3% rise in September, following a 0.2% increase in August, consistent with forecasts. However, the annual core PCE inflation remained steady at 2.7%, contrary to economists' predictions of a slight reduction to 2.6%.
Quincy Krosby, Chief Global Strategist for LPL Financial, commented on the core PCE's year-over-year 2.7% increase, suggesting that the Federal Reserve still faces challenges in controlling inflation. She noted that while a 25-basis point rate drop is anticipated at the upcoming Federal Reserve meeting, the Fed must consider enduring consumer spending resilience, wage growth from successful strikes, and a strong labor market. This suggests a gradual approach toward rate reductions is necessary until inflation stabilizes to the Federal Open Market Committee's satisfaction.
The Commerce Department also reported a 0.3% rise in personal income for September, following a 0.2% increase in August, in line with economic predictions. Similarly, disposable personal income, which accounts for current taxes, mirrored this growth with a 0.3% increase.
Personal spending outpaced expectations by climbing 0.5% in September, surpassing the predicted 0.4% rise, and followed a 0.3% increase in August. When adjusted for price changes, spending rose by 0.4% after a 0.2% prior increase. Consequently, with spending outstripping income, the personal saving rate as a percentage of disposable income fell to 4.6% in September, down from 4.8% in August.
