Consumer Spending Falls as Inflation Indicator Rises
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The Federal Reserve’s preferred measure of underlying inflation rose at a mild pace in January, offering some relief after a string of reports suggested price pressures are heating up again, while consumers pulled back on spending.
The so-called core personal consumption expenditures price index, which excludes food and energy items, rose 0.3% from December. From a year ago, it increased 2.6%, matching the smallest annual increase since early 2021, Bureau of Economic Analysis data out Feb. 28 showed.
Inflation-adjusted consumer spending fell 0.5%, marking the biggest monthly decline in almost four years amid extreme winter weather after a robust holiday season.
The Feb. 28 report offers some relief on the inflation front after other reports on prices have suggested progress has not only stalled but is now reversing. Fed officials have indicated they need to see a meaningful easing in inflation before they begin lowering interest rates again, especially when they factor in the uncertainty around how President Donald Trump’s policies will impact prices.
PCE and core pce rose 0.3% each - as expected. Year/year inflation overall 2.5% and core 2.6% respectively. Personal income rose 0.9% in Jan while spending fell 0.2%. — Kathy Jones (@KathyJones)
At the same time, the outsize decline in spending may raise concerns about the resilience of the U.S. economy.
U.S. Treasury yields, stock futures and the dollar were higher following the release.
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