US Core PCE Prices December 2023: Rose Below 3% Rate

According to the first vintage (indicated by the black dot), the 12-month change through January 2014 was estimated at 1.09 percent. It was then revised to 1.24 percent with the annual revision of that year; then to 1.44 and 1.47 percent https://traderoom.info/ with the two subsequent annual revisions. Finally, according to the current vintage (the red line), the 12-month change through January 2014 is estimated to be 1.52 percent—about 1/2 percentage point higher than the first release.

1. When they cut back on spending, it points to problems in the overall economic picture.
2. More detailed information on the CPI is available in this slideshow.
3. But while there was no deflation again in December, the monthly pace was in line with the 0.2% economists surveyed by FactSet expected.
4. That was in line with what economists had forecast and matched the November reading.

Personal incomes increased 0.3% in December from November, according to Friday’s data. The gain was as expected, falling short of the surprising 0.4% uptick logged in November. Consumer spending may have continued at a healthy pace over the holiday month, but growth in real incomes was lackluster at the end of 2023. Consumers also scaled back their spending on services, with spending decelerating to a 0.3% increase from 0.4% in November.

What Is the Difference Between the PCE Price Index and the Consumer Price Index?

Other effects include differences in the way seasonal adjustments are made, how items like airline fares are treated, and other residual differences. CPI only records out-of-pocket expenditure on medical and health care (XLV). The PCE on the other hand, also includes expenses paid by employers and other federal programs.

Headline PCE Inflation Holds Steady at 2.6%

Since 2008, however, the difference has been smaller, 1.7 percent and 1.4 percent. Economists and analysts use PCE to make projections about future spending trade all crypto and economic growth. It gives companies insight into their business needs concerning products and services and can affect hiring and investing.

“A comparison of measures of core inflation.” Economic Policy Review, Vol. In conclusion, our results suggest that the two indexes of core inflation should be viewed as complementary tools for gauging the underlying pace of inflation. For example, if rising gas prices lead consumers to drive less and cut down on fuel spending, the PCE will reflect that change in purchase frequency. Personal consumption expenditures data provide a view of how the economy is faring.

What is Core PCE?

Core inflation is considered an indicator of underlying long-term inflation. Inflation as measured by the Personal Consumption Expenditures (PCE) price index rose 0.4 percent in August and 3.5 percent over the past year, according to data out this morning from the Bureau of Economic Analysis. Core PCE inflation, which leaves out food and gas prices, rose 0.1 percent monthly and 3.9 percent year-over-year.

Because economists often are interested in the persistent movements in inflation, they have proposed a number of measures to capture this particular component, which can be thought of as the inflation trend or underlying inflation. Three of the best-known measures of underlying inflation are median inflation, trimmed mean inflation, and core inflation (all items excluding food and energy). The personal consumption expenditures price index, commonly known as the PCE price index, is one of the main measures of inflation and consumer spending in the U.S. The Bureau of Economic Analysis (BEA) publishes the PCE price index each month to track spending and inflation. Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy.

Central Banks

As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world’s major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master’s degree in Asian classics from St. John’s College. CPI and the PCE index both measure U.S. inflation in similar but ultimately different ways.

The PCE, produced monthly by the Bureau of Economic Analysis, also records changes in the prices of a basket of goods from month to month. BEA measures consumer spending for the nation and is broken down by state and the District of Columbia. While it issues the aforementioned monthly report, additional details are provided annually. The most recent PCE price index data was released on January 26, 2024, covering the month of December 2023. The headline December PCE inflation figure was +2.6% year over year, which is the same as the annual rate of +2.6% in November.

The CPI is based on a survey of what households are buying; the PCE is based on surveys of what businesses are selling. Some observers feel that this reflects the inability to value personal consumption expenditures accurately. The BEA uses the current dollar value of PCE to calculate the PCE Price Index. As mentioned, PCEPI shows price inflation or deflation that occurs from one period to the next. Like most price indexes, the PCEPI must incorporate a deflator (the PCE deflator) and real values to determine the amount of periodic price change. An estimated total for PCE is compiled by the BEA to measure and track changes in spending on consumer goods over time.

But factoring in inflation, real disposable incomes only rose 0.1%, compared with the 0.5% increase recorded in December. Investing.com — Earnings season ramps up, big central banks kick off their first meetings of 2024 and PMI data is set to show how the global economy is faring at the start of the year. Investing.com — The Federal Reserve left interest rates unchanged Wednesday, though signaled no rush to cut rates as more confidence was needed that “elevated” inflation continues to slow toward…

At next week’s Federal Open Market Committee, officials are widely expected to hold benchmark rates steady again. The personal savings rate slipped to 3.7% in December from 4.1% in November, suggesting Americans dipped into savings to fuel consumption, wrote Eugenio Aleman, chief economist at Raymond James. Other economists note that consumers are also relying more on credit now that pandemic-era savings reserves have started to dwindle.

As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health. However, if consumer income rises, called wage growth, while the prices of goods and services remain unchanged, consumers will have more purchasing power. Also, as investment portfolios and home prices rise, asset inflation occurs, which can provide additional money for consumers to spend. Also, oil and gas are commodities and are traded on exchanges where traders can buy and sell them. The speculation of energy and food commodities leads to volatility in their prices, causing wild swings in the inflation figures.