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March 29, WASHINGTON (Reuters) – The U.S. s. Pricing eased in February as the cost of goods and services other than housing and energy dropped dramatically, retaining the possibility of a Federal Reserve interest rate cut in June.
The Commerce Department’s report, released on Friday, also revealed that consumer spending increased last month for the first time in slightly over a year, highlighting the resilience of the economy.
Because of the country’s robust labor market, the US continues to perform better than its international counterparts even with higher borrowing costs.
Chief economist Jeffrey Roach of LPL Financial in Charlotte, North Carolina, stated that “core services inflation is slowing and will likely continue throughout the year.”.
“The data ought to persuade the Fed to start the process of normalizing interest rates by the time it meets in June. ****.
Last month, the Bureau of Economic Analysis of the Commerce Department reported that the price index for personal consumption expenditures (PCE) increased by 0.3 percent.
Data for January was updated to reflect a 0.4 percent increase in the PCE price index, as opposed to the 0.3 percent increase that had been previously reported.
The PCE price index was expected to increase by 0.4 percent for the month, according to economists surveyed by Reuters.
The cost of gasoline and other energy products increased by 3.4 percent last month, which helped to drive up goods prices by 0.5 percent.
The costs of vehicles, apparel, footwear, and recreational goods all saw significant price increases.
However, the cost of durable manufactured goods such as furniture and appliances was muted.
PCE inflation increased by 2.5 percent in January and by 2.5 percent in the 12 months that ended in February.
Inflation is still higher than the U.S. even though price pressures are lessening at a slower rate than in the first half of the previous year. S. the 2 percent target set by the central bank.
The inflation data for February, according to Fed Chair Jerome Powell on Friday, was “more along the lines of what we want to see.”. “.
Following a 525 basis point increase since March 2022, Fed officials last week decided to leave the policy rate in its current range of 5 points 25 to 5 points 50 percent.
Three rate cuts this year are anticipated by policymakers.
The first rate cut is anticipated by the financial markets in June.
the majority of U. s. Every financial market was closed on Good Friday except for the foreign exchange market.
The data showed that the dollar declined in relation to a currency basket.
Some consistency remnants: the PCE price index rose 0.3 percent last month when the erratic food and energy components were taken out.
That came after a downwardly revised 0.5 percent increase in January.
According to earlier reports, the so-called core PCE price index increased by 0.4 percent in January.
Core inflation grew by 2 percentage points annually in February, marking the lowest increase since March 2021, following a 2 percentage point increase in January.
In order to determine monetary policy, the Fed monitors PCE price measures.
Over time, monthly inflation readings of 0 percent are required to return inflation to target.
Some stickiness persists even though different weights prevented the PCE price data from reproducing some of the firmer readings from the producer and consumer price reports.
For the last three months, the annualized rate of increase in core inflation has been 3.5%.
Following a 0.6 percent increase in January, services prices increased by 0.3 percent.
Utilities and housing costs increased by 0.5%.
The costs of insurance, financial services, and recreational services all saw significant increases.
However, while the cost of healthcare increased slightly and transportation services barely increased, the cost of eating out and hotel and motel rooms remained the same.
After rising by 0.7 percent in January, PCE services inflation, excluding energy and housing, increased by 0.2 percent in the previous month.
After rising 3.5 percent in January, the so-called super core increased 3.3 percent year over year.
To assess their success in containing inflation, policymakers are keeping an eye on the super core data.
It has increased at a rate of 4 percent and change over the last three months, according to some economists, supporting a delay in rate cuts.
Others, however, claimed that the high reading was simply the consequence of the price spike in January and did not indicate a change in the general trend.
Therefore, although odd things can happen in specific months without changing the overall picture, the fundamental pressure on inflation is to the downside. ****.
Spending by consumers, which makes up over two-thirds of U.S. S. economic activity increased by 0.8% last month.
It came after a 0.2 percent increase in January and was the biggest gain since January 2023.
Consumer spending increased by 0.4 percent after declining by 0.2 percent in January when inflation was taken into account.
The growth in “real consumer spending” indicated that the first quarter’s consumption momentum was probably maintained.
Due to this, the Atlanta Fed revised its forecast for the growth of the gross domestic product this quarter from a 2 percent pace to a 2 percent annualized rate.
The Bureau of Census Bureau data also provided support to growth prospects, as it showed that wholesale and retail inventories increased rapidly in February, offsetting a 1.5 percent increase in the goods trade deficit.
However, as income increased, savings were used to cover a large portion of the spending.