US consumer spending rises in August; underlying inflation slows
US CONSUMER spending increased in August, but underlying inflation moderated, with the year-on-year rise in prices excluding food and energy slowing to below 4.0 per cent.
Consumer spending, which accounts for more than two-thirds of US economic activity, gained 0.4 per cent last month, the Commerce Department reported on Friday (Sep 29). Data for July was revised higher to show spending increasing 0.9 per cent instead of the previously reported 0.8 per cent. Economists polled by Reuters had forecast spending would gain 0.4 per cent.
Some of the rise in spending last month reflected higher prices. Petrol prices accelerated in August, peaking at US$3.984 per gallon in the third week of the month, the highest this year, according to data from the US Energy Information Administration. That compared with US$3.676 per gallon during the same period in July.
With gasoline price surging, inflation as measured by the personal consumption expenditures (PCE) price index rose 0.4 per cent in August after climbing 0.2 per cent in July. In the 12 months through August, the PCE price index advanced 3.5 per cent after rising 3.4 per cent in July. The annual PCE inflation is also being lifted by a lower base of comparison last year.
But underlying inflation pressures are subsiding, which will be welcomed by Federal Reserve officials.
Excluding the volatile food and energy components, the PCE price index gained 0.1 per cent, after increasing 0.2 per cent in the prior month. The so-called core PCE price index increased 3.9 per cent on a year-on-year basis in August after rising 4.3 per cent in July.
The US central bank tracks the PCE price indexes for its 2 per cent inflation target. The Fed held interest rates steady last week but stiffened a hawkish monetary policy stance. Since March 2022, the central bank has raised its policy rate by 525 basis points to the current 5.25 per cent to 5.50 per cent range. REUTERS
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