Inflation Ticks Up in July Amid Rising Consumer Spending

Data from the Commerce Department on Friday showed that consumer prices increased at a faster pace last month than the previous month.

In July, the personal consumption expenditures index increased by 0.2 percent compared to June. This is an increase from the 0.1 percentage increase that occurred in June compared to May. The economists expected the acceleration.

The personal consumption expenditures index (PCE) rose by 2.5 percent over the last year, matching the increase of June.

Officials say that they are also closely monitoring other inflation measures. The Federal Reserve uses PCE prices to determine its official target of two percent and for its publicly released projections. On an annualized base, the PCE inflation rate has been slightly below the Fed target for three consecutive months, even though the year-over-year figure is still half a percentage point above the target. The annualized three-month rate is now at 0.9 percent.

The core PCE price index, which excludes energy and food, increased by 0.2 percent, the same as in previous months. The increase is 2.7 percent over a year.

After two consecutive months of declining prices, the prices for goods were unchanged in July. Durables fell by 0.3 percent in July after June’s flat price and May’s decline. After two months of declining prices, nondurables rose by just 0.1 percent.

Prices of services have increased by 0.2 percent over the last three months.

The report will likely support the argument that the Fed can afford to start cutting rates in September.

The incomes rose by 0.3 percent in the last month. The real disposable income after subtracting taxes and adjusting for inflation rose just by 0.1 percent. The increase in spending was 0.4 percent, after adjusting for inflation.

Before the inflation adjustment, wages and salaries increased by 0.3 percent. Manufacturing wages fell.