The Federal Reserve's preferred inflation gauge showed core consumer price pressures eased again in August, falling below the 4% for the first time in two years, as consumer spending continues to slow into the autumn months.
The Bureau of Economic Analysis' PCE Price Index showed core prices eased to 3.9% last month, matching Wall Street's forecast and slowing from the 4.3% pace recorded in July. On a monthly basis, core pressures were up 0.1%, a modestly slower pace compared to the summer months.
The headline index, meanwhile, sped to an annual rate of 3.5%, a tad quicker than the 3.4% pace in July thanks in part to the ongoing rise in global energy prices.
Data on August consumer spending and personal incomes was also released in the report, with spending up 0.4%, matching Street forecasts but coming in at half the pace of the July gains, which were flattered by Amazon's (AMZN) -) Prime Day sales
Markets will likely key on the BEA's core PCE price index, which the Fed considers to be a more accurate representation of consumer price pressures, as well as its estimate of personal income and spending gains in the what could be the final on-time data release for the next several weeks, should the expected government shutdown begin this weekend in Washington.
The Bureau of Labor Statistics reported earlier this month that its headline consumer price index ticked higher in August, to 3.7%, while core prices, which strip out volatile food and energy costs, eased to 4.3%.
The CME Group's FedWatch suggests only a 17.3% chance of a quarter point rate hike in November, with the odds of a similar increase in December pegged at 30.8%.
"Real consumers’ spending is now coming under pressure, after a strong first half. Most of the excess savings accumulated during Covid have been spent, and the remainder is mostly held by high-income households, who are less likely to spend it," said Ian Shepherdson of Pantheon Macroeconomics.
."A sustained period of sluggish growth in consumption is now a decent bet, unless people start to run down non-Covid savings, take on extra debt, or see a sudden increase in their incomes. The last seems unlikely; higher gas prices meant that real after-tax incomes fell in July for the first time since the spike in energy prices during the invasion of Ukraine."
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