PCE inflation gauge hits highest since 1991

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Personal spending growth in the United States rose 0.8% from the previous month, following a downward-revised 0.1% drop in July, Commerce Department figures showed on Friday. Spending in July was previously reported as a gain of 0.3%.

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The increase in spending was driven by an increase in spending on goods, especially food and household supplies, likely reflecting a shift away from activities such as dining out and travel due to increased health concerns.

Even though spending – which accounts for about two-thirds of gross domestic product – increased in August, the downward revision from the previous month indicates “only a slight gain” in third-quarter spending, according to a note from Wells Fargo & Co. Economists polled by Bloomberg expect the quarterly figure to rise 2.2% after increases of more than 10% for the previous two periods.

The median estimate from a Bloomberg survey of economists predicted a 0.7% month-over-month increase in total spending and a 0.3% increase in the price index.

Stocks were higher at 10:57 a.m. on Friday, the dollar fell and Treasuries were little changed.

Adjusted for inflation, spending in August also rose after falling the month before. Real personal spending rose 0.4% in August after a revised 0.5% drop the month before.

Inflation-adjusted spending on services rose 0.3% from the previous month, slowing down from the 0.7% gain recorded in July. Spending on goods rose 0.6% after falling 2.6%, according to the report.

Supply has struggled to keep up with the rapid recovery in demand since the start of this year, as companies seek to fill a record number of vacancies and acquire the materials needed for production. These constraints have pushed prices up and eaten away at the purchasing power of Americans.

Core PCE, which excludes power and power, rose 0.3% for a second month. The measure was up 3.6% from the previous year, the highest since 1991.

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Fed Chairman Jerome Powell said this week that the supply chain disruptions that have driven inflation rates up around the world will ultimately prove temporary.

“It’s very difficult to say how big the effects will be in the meantime, or how long they will last, but we expect that we will come back, we will get there,” Powell said Wednesday during an appearance at a virtual conference. panel event.

A senior White House official said after the report that semiconductor and transportation supply chain bottlenecks “appeared to be more persistent” than expected a quarter or two ago. “We are monitoring these risks, but are encouraged by the trend lines,” the official said, referring to the slower pace of month-to-month price growth in recent reports.

A separate report released on Friday showed that U.S. consumer confidence rose slightly in late September, while remaining near a pandemic low.

Personal income, meanwhile, rose 0.2% after rising 1.1% the month before due to a boost from an early disbursement of the child tax credit. Wages and salaries increased 0.5%.

Personal disposable income, or after-tax income adjusted for inflation, fell 0.3% in August.

The savings rate, which has been high for months due to stimulus measures and increased unemployment benefits, fell to 9.4% in August from 10.1%.

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