(Original headline: Fed’s Preferred Inflation Gauge Keeps Falling Biden: It Will Take Time to Return to Normal Levels)
December 1 Financial Associated Press News (Edited by Xia Junxiong)On Thursday (December 1), local time, the U.S. Department of Commerce’s Bureau of Economic Analysis released its report on personal income and spending for October. US consumer spending rose sharply in October, helped by moderating inflation.
Data shows that personal spending in the United States rose 0.8% month-on-month in October, in line with expectations, and the previous value was 0.6%, slowing.
As the Fed’s preferred inflation gauge, October’s US core PCE price index (excluding food and energy) rose 0.2% MoM and 5% YoY, lower respectively to 0.3% and 5.1% expected, and the previous value was 0.5% and 5.1%, respectively.
It should be noted that since 2000, the Federal Reserve has used personal consumption expenditure (PCE) as the primary basis for judging inflation. Compared with the consumer price index (CPI), the PCE can better reflect consumer behavior.
Following the release of October’s PCE data, US President Joe Biden said early signs indicate the Fed has made progress in fighting inflation, but it will still take some time to return to normal inflation levels.
Ryan Sweet, chief US economist at Oxford Economics, commented, “US households are entering the holiday season in pretty good shape. Overall, this will be another solid holiday shopping season with low unemployment and wage growth. Still solid.” .
Consumer spending in October was supported by wage increases stemming from a strong job market, a California tax rebate and cost-of-living adjustments for food stamp recipients, among other factors.
Solid consumer spending, which accounts for more than two-thirds of US economic activity, helped drive US economic growth in the third quarter. Data released Wednesday showed US GDP grew at an annualized rate of 2.9% in the third quarter and 1.9% year on year.
However, there are signs that consumer spending may have hit a ceiling. US household spending grew faster than income in both August and September, suggesting more people are drawing on savings to support consumption amid high inflation. The personal savings rate in the US has fallen in recent months to its lowest level since 2008.
The Fed is in the midst of its fastest rate-hiking cycle since the 1980s, with the central bank raising rates by a total of 375 basis points this year, taking the federal funds rate from near zero to 3.75%-4.00%, and last four rate meetings The average increase in interest rates was 75 basis points.
However, Federal Reserve Chairman Jerome Powell said on Wednesday that the pace of rate hikes will slow as early as December. It was widely read by the market as a signal for a 50 basis point rate hike in December.
Powell also pointed out that the US is still a long way from price stability and much more evidence is needed to convince people that inflation is coming down.
