JULY 3, 2023 – KEY INFLATION FIGURE UP ONLY 0.3 PERCENT IN MAY
The personal consumption index (PCE), the Fed’s key inflation measure, increased by 0.3 percent for the month of May. Headline PCE is up 3.8 percent for the year, while core PCE (excluding food and energy) is up 4.6 percent. The data indicates a slight easing of inflation during last month. In comparison, core PCE for May was up just 0.1 percent, compared to 3.8 percent a year ago. The headline year-over-year number is the lowest since April 2021, while the core is the lowest since October 2021.
Consumer spending was up only 0.1 percent in May, below expectations and significantly down from the 0.6 percent increase experienced in April. Spending is down as prices rise, and some economists believe the pent-up demand that occurred during the Covid years has finally run its course.
Inflation seems to be moving in the right direction, but that doesn’t mean rates won’t move up again this year. Traders are pricing in a 87 percent chance the Fed will raise rates again by a quarter-percent at their regular meeting in July.