Key Fed inflation gauge rose 0.3% in February, less than expected

[BumRushDaShow]

Source: CNBC

An inflation gauge the Federal Reserve follows closely rose slightly less than anticipated in February, providing some hope that interest rate hikes are helping ease price increases.

The personal consumption expenditures price index excluding food and energy increased 0.3% for the month, the Commerce Department reported Friday. That was below the 0.4% Dow Jones estimate and lower than the 0.5% January increase.

On a 12-month basis, core PCE increased 4.6%, a slight deceleration from the level in January. Including food and energy, headline PCE increased 0.3% monthly and 5% annually, compared to 0.6% and 5.3% in January.

The softer than expected data came with monthly energy prices decreasing 0.4% while food prices rose 0.2%. Goods prices rose 0.2% while services increased 0.3%. In other data from the report, personal income increased 0.3%, slightly above the 0.2% estimate. Consumer spending increased 0.2%, compared to the 0.3% estimate.

Read more: https://www.cnbc.com/2023/03/31/fed-inflation-gauge-february-2023-.html

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Article updated.

Original article -

An inflation gauge the Federal Reserve follows closely rose slightly less than anticipated in February, providing some hope that interest rate hikes are helping ease price increases.

The personal consumption expenditures price index excluding food and energy increased 0.3% for the month, the Commerce Department reported Friday. That was below the 0.4% Dow Jones estimate and lower than the January increase.


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[Yonnie3]

1. I believe I was just looking at this report

https://www.bea.gov/news/2023/personal-income-and-outlays-february-2023 (not a PDF)

[IronLionZion]

2. People are getting squeezed by these rates, so they buy less

which is entirely the point of raising rates. If people can't afford financed payments on big items, they cut back spending on smaller items like food and other products.

[Yavin4]

4. Also, businesses have higher costs to service their debts which they got when debt was cheap.

That has led to layoffs and slowing down of hiring which puts a damper on salaries. Harder for people to make more money to pay more for things.

IOW, the Fed is getting exactly what it wants, an economy heading into a recession.

[IronLionZion]

6. Businesses might also raise prices because of higher interest payments

layoffs are disappointing. We've seen tech and banking hit by that recently. But we may soon see impacts to manufacturing, farming, and other sectors.

[peppertree]

3. "On a 12-month basis, core PCE increased 4.6%"

Which is why Republicans love to use "chained prices" - except for things their donors like, of course.

[Igel]

8. Wouldn't that cut the wrong way?

Because of price increase they change their "basket" to avoid prices they think too high?

A chained price index would reflect this, and reduce the inflation numbers. An absolute price index wouldn't.

[peppertree]

9. Well - for starters, 4.6% inflation ('core' or not) is utter fantasy

I mean, compared to March 2022? No one can seriously think it's even close - and if they do, I've got oceanfront property in Iowa for sale.

So - of course Republicans are all for setting COLAs on Social Security and, say, federal employee wages based on that chained index.

But when it comes to defense contracts and other federal contracts awarded to GOP friends (many of which are Russian-style sweetheart contracts, sadly) - well, you can bet those "chained" indexes don't show up anywhere in the (frequent) contract redeterminations.

[progree]

10. Dunno, what do you think the inflation rate is, and based on what?

The last 3 months average, annualized, using the actual index numbers (rather than single-digit math):
CPI: 4.15%, PCE: 4.23%,
Core CPI: 5.17%, Core PCE: 4.88%

(Food has been running hotter all along than any and all of the above)

Edit: I see you mentioned the since March 2022 -

February over February is 5.99% for the CPI and 5.53% for the Core CPI and
5.00% for the PCE and 4.60% for the core PCE.

And yes I know these things can't be measured to anywhere near that precision, I just use the 2-digits to the right out of habit in my Excel spreadsheet (I use the actual index numbers for the calculations, not single-digit math). And that there are issues with things like housing costs.

[progree]

5. Graphs - latest PCE, CPI, PPI (both regular and core). And rolling 3 mo, 6 mo, 12 mo of core PCE

Last edited Wed Apr 12, 2023, 10:01 AM - Edit history (6)

From the news release, http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

Prices

From the preceding month, the PCE price index for February increased 0.3 percent (table 9). Prices for goods increased 0.2 percent and prices for services increased 0.3 percent. Food prices increased 0.2 percent and energy prices decreased 0.4 percent. Excluding food and energy, the PCE price index increased 0.3 percent. Detailed monthly PCE price indexes are presented on Table 2.4.4U

From the same month one year ago, the PCE price index for February increased 5.0 percent (table 11). Prices for goods increased 3.6 percent and prices for services increased 5.7 percent. Food prices increased 9.7 percent and energy prices increased 5.1 percent. Excluding food and energy, the PCE price index increased 4.6 percent from one year ago.

And they show the last 5 months. I found the latest 12 months (and way beyond) at FRED:

PCE: https://fred.stlouisfed.org/series/PCEPI
CORE PCE: https://fred.stlouisfed.org/series/PCEPILFE

PCE Inflation (just came out today, March 31):


What a difference a month makes. Before today's report, when the last bar was January, it looked like a rewarming of core PCE inflation. With February's 0.3% number, it looks quite a bit better, maybe roughly a flat-lining with with wiggles.

PCE, rolling 3 month averages, annualized
7.25% 7.42% 6.17% 4.75% 2.10% 4.21% 3.81% 3.22% 3.85% 4.23%

CORE PCE, rolling 3 month averages, annualized
4.30% 5.39% 4.40% 5.13% 4.45% 5.45% 4.08% 3.71% 4.56% 4.88%

Consumer Price Index (CPI)

CPI - https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI - http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)
Updated 4/12/23 to include March:

Producer Price Index (PPI)

OLD CORE PPI - Producer Price Index, seasonally adjusted - Final demand goods less foods and energy -
http://data.bls.gov/timeseries/WPSFD413?output_view=pct_1mth

CORE PPI - Producer Price Index, seasonally adjusted - Final demand less foods. energy. and trade services - This is the core measure that the BLS features, so I will follow their lead
http://data.bls.gov/timeseries/WPSFD49116?output_view=pct_1mth
(Choose "More Formatting Options" at the upper right of the page for other views such as rolling averages of past 12 months, past 6 months, past 3 months)



Why the Fed thinks core is better for forecasting future inflation: https://www.democraticunderground.com/10143025190#post10

3 months annualized: Core CPI: 5.11%, Core PCE: 4.88%, Core PPI (wholesale prices): 3.74%
(Core CPI above updated 4/12/23 to include the March data)

I chose 3 months for its recency, but that it's still a longer period than one month, so less likely that one can dismiss it as a "one off", as some try to do when the last month is bad (and make it THE only data when the last month is good)

Back to the CORE PCE 3 months, 6 months, and 12 months rolling averages (all are annualized rates)



Looking at 3 month and 6 month rolling average, it looks like a flat-lining with wiggles for several months -- we're at the same place we were several months ago. The 12 month shows only the slightest decline.

Edited to add 405 PM ET on seeing some comments

The Fed has long targeted 2%. Did people really expect they'd just declare that the target was always there just for shits and giggles and they were content now with inflation rates more than twice as high as that, and were just going to sit on their rusty dusties and "wait" for inflation to come down when it has been essentially flat on a rolling 3 month and 6 month basis; when they made their last rate hike decision March 21, the recent trend of those had been going up). My big song and dance about what I think of using the rolling 12 month inflation to gauge RECENT or CURRENT inflation: https://www.democraticunderground.com/10143045881#post6 .

My harangue about not only was Powell renominated by President Biden, but the vast majority of Democratic senators voted for his confirmation. And that it's not just Powell, but the rest of the Federal Open Market Committee (FOMC) that is voting unaminously for rate hikes. And a reminder that last June, when inflation was 8.9%, continuing at that rate would cut the purchasing power of the dollar in half in just 8.1 years, and down to a quarter in 16.2 years. And that historically, in relatively high inflation periods, wages don't keep up with prices. And the purchasing power of savings and investments tend to be devastated (as opposed to the nominal dollar figure, which might actually look pretty good - fool's gold). https://www.democraticunderground.com/10143049684#post7

At the core PCE inflation rate of 4.88% (3 month average, annualized), the purchasing power of the dollar is halved in 14.5 years, and quartered in 29 years. That isn't OK with me.

Edited 529p ET- Stocks, Treasury yields, and more (the S&P 500 closed up 1.4%, and a scroll through the financial headlines credits the tamer-than-expected PCE inflation report. The S&P 500 has now had two positive quarters in a row, but is still 14.3% below its 1/3/22 all-time high) : https://finance.yahoo.com/

[roamer65]

7. Time for the Federal Reserve to halt rate increases.

Cuts need to be on the agenda after the halt.

[oldsoftie]

11. I agree on a pause. Not on planned cuts.

The recent hikes need to be given time to move thru the economy; possibly lowering inflation more by the month without more rate increases. They could always move up a bit more if needed. But if you start taking about cuts & then have to backtrack; that’ll kick the economy right in the nuts IMO. I think it’s best to see if we can get into the 3-4% range over the next several months. If they’re able to halve inflation in 18 months I’d see it as a big positive going into election year. With time to make the economy stable as well. Because it seems the Fed always takes to long to raise and then goes too far; and then is forced to drop dramatically as well.