Fed Quandary: Core Inflation, Incomes and Spending Rising
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Global Economy Briefs

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The Bureau of Economic Analysis revealed that total Personal Consumption Expenditure (PCE) deflator inflation slowed further in August, but core and super core inflation ticked up year-over-year. Meanwhile, household income growth was revised upward over the last year and continues to grow, and consumers remain content to spend (Figure 1).

Fed Quandary: Core Inflation, Incomes and Spending Rising

September 27, 2024

The Bureau of Economic Analysis revealed that total Personal Consumption Expenditure (PCE) deflator inflation slowed further in August, but core and super core inflation ticked up year-over-year. Meanwhile, household income growth was revised upward over the last year and continues to grow, and consumers remain content to spend (Figure 1).

Figure 1. Consumers continued to spend over July-August span

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Sources: Bureau of Economic Analysis and The Conference Board.

Trusted Insights for What’s Ahead®

  • Ongoing moderation in total inflation towards the Fed’s 2-percent target supports further interest rate cuts.
  • However, robust household spending especially on services, and a continued influx of income, especially from employment, poses upside risk to real GDP growth.
  • Moreover, heavy consumption of services may continue to place upward pressure on super core Inflation given strong consumer demand and labor shortages that are keeping wage and benefits growth elevated.
  • Indeed, both core (total less food and energy) and super core inflation (services less housing and energy) hastened on a

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