A closely watched US price gauge rose in line with expectations in July and consumer spending stalled, giving the Federal Reserve more room to hold interest rates steady.
The personal consumption expenditures price index rose 0.2%, Bureau of Economic Analysis data showed Wednesday. The so-called core PCE index, which excludes food and energy items, also advanced 0.2% from a month earlier, and 3.3% from a year earlier. Inflation-adjusted consumer spending was flat last month following strong increases in May and June.
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The numbers add to a string of reports suggesting the economy cooled in July after robust spending earlier in the summer. The data will also likely bolster the case at the Fed for holding interest rates unchanged as officials watch for more signs that inflation pressures from the Iran war are receding.
US Treasury yields and the dollar rose following the release, while US stock index futures fell.
Investors will be listening for Fed Chairman Kevin Warsh to clarify his views about how the US central bank should react to stubborn inflation when he speaks on Friday at an annual gathering in Jackson Hole, Wyoming. The latest data showed the Fed's preferred price gauge was up 3.7% from a year earlier, still well above the central bank's 2% goal.
A separate report out Wednesday showed the US economy expanded in the second quarter at the same pace as initially estimated, though the details pointed to stronger consumer spending.
Amazon.com Inc.'s decision to move its Prime Day sales event to June this year from July the year before likely pulled forward some spending, depressing last month's figures. But economists remain wary about the outlook with average gasoline prices back above $4 a gallon, and some say the buffer from higher-than-usual tax refunds that likely helped bolster spending in recent months is gone.
Retailers including Walmart Inc. have said price-conscious consumers are still spending but searching for deals and unique merchandise.
Wednesday's figures showed personal income, a metric which is not adjusted for inflation, rose 0.4%, while wages and salaries advanced 0.3%.
After adjusting for inflation, disposable income rose 0.4%. The saving rate climbed to 3%, a four-month high.
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The details showed inflation-adjusted spending on core goods fell 0.8%, while inflation-adjusted services spending rose 0.3%. A closely watched metric of services inflation that excludes energy and housing was up 0.3%.
Starting next month, the BEA will make changes to how prices are measured for certain categories — including legal services, computer software and investment advice — that many economists expect will mean a lower core PCE reading.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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