Key Fed Inflation Measure Rose 0.4% in January Up 2.8% From a Year Ago

The personal consumption expenditures price (PCE) index, excluding food and energy costs, increased 0.4% in January and 2.8% from a year ago, as expected according to the Dow Jones consensus estimates.
Headline PCE, including the volatile food and energy categories, increased 0.3% monthly and 2.4% on a 12-month basis, compared with respective estimates for 0.3% and 2.4%, according to the numbers released Thursday by the Commerce Department’s Bureau of Economic Analysis. The respective December numbers were 0.1% and 2.6%.
The moves came amid an unexpected jump in personal income, which rose 1.0%, well above the forecast for 0.3%. Spending decreased by 0.1% versus the estimate for a 0.2% gain. January’s price rises reflected an ongoing shift to services over goods as the economy normalises from the COVID-19 pandemic disruptions.
Services prices increased 0.6% on the month while goods fell 0.2%; on a 12-month basis, services rose 3.9% and goods were down 0.5%. Within those categories, food prices accelerated 0.5%, offset by a 1.4% slide in energy. On a year-over-year basis, food was up 1.4%, while energy fell 4.9%.
Both the headline and core measures remain ahead of the Fed’s goal for 2% annual inflation, even though the core reading on an annual basis was the lowest since February 2021. While the Fed officially uses the headline measure, policymakers tend to pay more attention to the core as a better indication of where long-term trends are heading.
“Overall, the report is meeting the expectations, and some of the worst fears in the market weren’t met,” said Stephen Gallagher, chief U.S. economist at Société Générale. “The key is we’re not seeing the broad nature of increases that we had been more fearful of,” he further explained.
January’s consumer price index data raised fears of persistently high inflation, though many economists saw the rise as impacted by seasonal factors and shelter increases unlikely to persist.

(Source: CNBC)