Economists surveyed by Dow Jones had expected the PCE to increase by 0.1 percent in August and 2.3 percent on a year-over-year basis. Excluding food and energy, the core PCE rose 0.1 percent in August and 2.7 percent year-over-year, which was 0.1 percentage point higher than July.
Core PCE is considered a more reliable indicator of long-term inflation trends by Fed officials. Economists had predicted a monthly rise of 0.2 percent for core PCE and 2.7 percent for the 12-month figure.
“All quiet on the inflation front,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. “Add today’s PCE Price Index to the list of economic data landing in a sweet spot. Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”
Despite the positive inflation data, personal income and spending figures came in lower than expected. Personal income grew by 0.2 percent, while personal spending increased by 0.2 percent. Analysts had forecast 0.4 percent growth in income and 0.3 percent in spending.
Following the report, stock market futures turned positive, while Treasury yields declined. This inflation update arrived just over a week after the Federal Reserve reduced its benchmark overnight borrowing rate by half a percentage point, bringing it to a target range of 4.75 to 5 percent.