A key inflation indicator released by the U.S. Department of Commerce on Friday showed that the inflation rate in September was lower than expected. The report, which was delayed due to the government shutdown, may further pave the way for the Federal Reserve to cut interest rates.
The data showed that the so-called core Personal Consumption Expenditures (PCE) price index, excluding food and energy items, rose 0.2% month-on-month, unchanged from August and in line with market expectations; the year-on-year growth rate unexpectedly slowed to 2.8%, the lowest in three months, compared to market expectations of 2.9% for the third consecutive month.
Federal Reserve officials use the PCE price index as the primary policy tool for measuring inflation. While they refer to both headline and core data, they generally consider core data to be a better indicator of long-term inflation trends.
This report was delayed by several weeks due to the government shutdown, during which all data collection and economic reports were suspended. Regarding the next PCE data release, the Bureau of Economic Analysis stated that the timing of the next publication has not yet been rescheduled.
The pullback in consumer spending suggests that the primary engine of U.S. economic growth was already slowing before the longest government shutdown in history, which began on October 1. Although more recent data indicates robust sales performance during 'Black Friday' as shoppers searched for discounts, consumers have become increasingly anxious about the job market, and spending has largely been driven by wealthier households.
Another report released on Friday showed that consumer confidence rebounded in early December for the first time in five months. The rise in the University of Michigan’s index reflects growing optimism about personal financial prospects amid improved inflation expectations.
Editor/Joryn
