The U.S. Department of Commerce released a report on personal income and spending on Friday, September 26, showing that personal spending in the U.S. continued to grow steadily for the third consecutive month in August, with the core inflation rate remaining at 2.9%.
According to data from the Bureau of Economic Analysis at the Department of Commerce, the Personal Consumption Expenditures (PCE) price index increased by 2.7% year-on-year in August, with a 0.3% month-on-month increase. The core PCE index, which excludes food and energy, increased by 2.9% year-on-year and 0.2% month-on-month.
While the overall PCE index saw a slight increase from 2.6% in July, the core PCE index remained unchanged. These figures are in line with predictions made by Dow Jones.
Both consumer spending and personal income exceeded expectations. The data from the Bureau of Economic Analysis at the Department of Commerce shows that personal income increased by $95.7 billion in August (a monthly increase of 0.4%); Disposable Personal Income (DPI), which is personal income minus taxes, increased by $86.1 billion (a monthly increase of 0.4%).
Personal spending in August, including PCE, personal interest payments, and personal transfer payments, increased by $132.9 billion. Personal savings in August stood at $1.06 trillion, with a personal savings rate of 4.6%.
The continuing strong growth in consumer spending further confirms the steady state of the economy this quarter. However, sustaining this momentum largely depends on the labor market, which has shown signs of weakness with slowing job growth and modest wage increases.
Although the Federal Reserve has set its inflation target at 2%, the data released on Friday is unlikely to change expectations for interest rate cuts by policy makers. The market is heavily betting on a rate cut by the Federal Reserve in October, but enthusiasm for another cut in December has diminished. The Federal Open Market Committee approved a 25-basis-point cut in the federal funds rate last week, marking the first cut this year, bringing the target range for the benchmark rate to 4% to 4.25%.