The US Department of Commerce reported on Friday (December 5) that the preferred inflation indicator of the Federal Reserve, the core Personal Consumption Expenditures (PCE) price index for September, came in lower than expected. This paves the way for the central bank to further cut interest rates in the policy meeting scheduled for next week.
This report, delayed due to the 43-day government shutdown, showed that in September, the US Personal Consumption Expenditures (PCE) price index increased by 0.3% from the previous month and by 2.8% from the same period last year. These figures align with the expectations of economists from the London Stock Exchange Group (LSEG).
The core PCE price index, which excludes the more volatile food and energy prices, is a key inflation measure for the Federal Reserve. In September, this index increased by 0.2% from the previous month and by 2.8% from a year earlier. The monthly increase met economists’ expectations, but the annual increase was one percentage point lower than in August, also falling below economists’ forecasts.
In September, commodity prices rose by 0.5% month-on-month and by 1.4% year-on-year. This increase in speed is evident when compared to the 0.9% year-on-year increase in August, as well as the 0.6% increases in June and July respectively.
Durable goods prices rose by 0.9% year-on-year, slightly lower than the 1.2% increase in August. Non-durable goods prices accelerated in September, rising by 1.7% year-on-year, higher than the 0.7% increase in August.
Service prices increased by 3.4% year-on-year, slightly lower than the 3.6% increase in August.
The report also revealed that the personal savings rate remained unchanged at 4.7% from August.
The government shutdown led to a temporary halt in the collection and reporting of all economic data, causing delays of several weeks for this report released on Friday.
In addition to inflation figures, the Department of Commerce report also provided information on personal income and expenditures. In September, personal income increased by 0.4% while expenditures grew by 0.3%. Personal income data exceeded expectations by 0.1 percentage point, while expenditure data fell short by 0.1 percentage point.
Following the release of the data, the stock market rose as traders anticipated that the Federal Reserve would cut the benchmark interest rate by 0.25 percentage points in the policy meeting next week.
Although the data for September is lagging, this is the final batch of price data that the Federal Reserve’s Federal Open Market Committee (FOMC) will receive ahead of next week’s meeting. Futures market pricing suggests that the FOMC is almost certain to approve another rate cut by the end of the meeting on Wednesday.
The Department of Commerce has not announced the release date for the October PCE inflation report (due to the federal government shutdown for the entire month of October), while the report for November is currently scheduled for release on December 19th.