U.S. PCE Inflation Misses Forecasts, Eases Fed October Hike — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- PCE Price Index rose 0.3% in August, below the 0.4% economists had forecast, while July's gain was revised down to 0.1% from a previously reported 0.2%.
- Year-on-year PCE inflation came in at 3.4% in August after July was downwardly revised to 3.4% from a prior 3.7%, with the Commerce Department's methodology changes accounting for the downgrade.
- Core PCE inflation climbed 0.2% month-over-month and 3.0% year-on-year in August, with portfolio management services driving most of the methodology-driven revision that lowered the annual core rate by about 36 basis points.
- Consumer spending surged 0.9% in August after a downwardly revised 0.1% July gain, with inflation-adjusted spending up 0.6% and keeping GDP on track for another quarter of robust growth above 3%.
- New York Fed President John Williams said he saw "no urgency" for further action, and markets priced October rate-hike odds down to roughly 41.5% from 70% on Monday per CME's FedWatch Tool.
- The saving rate dropped to 4.1% in August, the lowest since November 2022, as households drew down reserves and income rose a modest 0.2% to sustain spending.
- Goods trade deficit widened 11.5% to $132.6 billion in August with imports soaring 5.5% to $336.1 billion, with economist John Ryding projecting a roughly 2.5-percentage-point trade drag on Q3 GDP.
Why it matters: The August PCE print came in softer than the 0.4% consensus and dragged July's year-on-year rate down to 3.4% from a previously reported 3.7%, which—combined with John Williams' "no urgency" remarks—pulled October rate-hike odds from 70% on Monday to about 41.5%. Yet consumer spending's 0.9% jump and a saving rate at a 14-month low of 4.1% show the economy is still running hot enough that Fed officials like Sal Guatieri expect another hike by year-end.
Ask SkimNews
