US Core PCE meets expectations; consumer spending surges 0.8% in July.

The PCE price index increased by 0.2% in July, primarily due to gains in the service sector. Personal income also grew by 0.2%, resulting in a 0.8% surge in consumer spending.

Highlights

• The PCE price index recorded a 0.2% increase in July.
• Real PCE climbed by 0.6%, primarily driven by spending on goods.
• Personal income grew, leading to a surge in consumer spending.

Price Index Movements

In July, the PCE price index rose by 0.2%. While goods prices declined by 0.3%, services prices increased by 0.4%. Excluding food and energy sectors, the PCE price index showed a 0.2% increase. Compared to the same month in the previous year, the PCE price index saw a significant 3.3% surge. Notably, goods prices dropped by 0.5%, while the services sector experienced a notable 5.2% increase.

Real PCE Analysis

Real PCE, after accounting for inflation, saw a 0.6% overall increase in July. Goods spending led the rise with a 0.9% jump, particularly driven by "other" nondurable goods and recreational goods sectors. Within services, the main contributors were food services, financial services, and housing utilities.

Personal Income and Consumer Spending

Personal income increased by $45.0 billion in July, representing a monthly growth of 0.2%. Disposable personal income (DPI), which considers total personal income minus current personal taxes, saw a marginal increase of $7.3 billion, less than 0.1%. Consumer spending, measured by personal consumption expenditures (PCE), surged by $144.6 billion, or 0.8%.

Insights on Expenditures

Services saw a significant increase of $102.7 billion in consumer spending, primarily driven by financial services and insurance, particularly portfolio management and investment advisory services. Other notable sectors contributing to the surge include housing and utilities, food services, and healthcare. On the goods side, spending increased by $41.9 billion, driven by "other" nondurable goods such as pharmaceuticals and recreational items.