Key Fed measure shows inflation rose 2.6% in May from a year ago, as expected

[BumRushDaShow]

Source: CNBC

Published Fri, Jun 28 20248:32 AM EDT | Updated 6 Min Ago


An important economic measure for the Federal Reserve showed Friday that inflation during May slowed to its lowest annual rate in more than three years.

The core personal consumption expenditures price index increased just a seasonally adjusted 0.1% for the month and was up 2.6% from a year ago, the latter number down 0.2 percentage point from the April level, according to a Commerce Department report.

Both numbers were in line with the Dow Jones estimates. May marked the lowest annual rate since March 2021, which was the first time in this economic cycle that inflation topped the Federal Reserve’s 2% target.

Including food and energy, headline inflation was flat on the month and also up 2.6% on an annual basis. Those readings also were in line with expectations.

Read more: https://www.cnbc.com/2024/06/28/may-pce-inflation-report.html

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Article updated.

Original article -

Published Fri, Jun 28 20248:32 AM EDT


The core personal consumption expenditures price index was expected to increase 0.1% in May and 2.6% from a year ago, according to the Dow Jones consensus.

This is breaking news. Please check back for updates.

[NoMoreRepugs]

1. More great economic news, despite the perception by so many that things are going in the other direction.

[progree]

2. Graphs, CPI, PPI, and today's PCE, Regular and Core

As always, I've been seeing some mischaracterizations of the recent inflation situation in the media, so here is a summary table followed by the graphs.

I annualize them all to be easy to compare to each other, and to compare to the FED's 2% goal. I use the actual index values rather than the one-digit changes that are commonly reported in the media. Links to the data are with the graphs.

ALL the numbers are the seasonally adjusted ones

The "1 month" number is the change from April to May expressed as an annualized number.

The "3 month" number is the growth over the last 3 months (and then annualized). It is calculated based on the change in the index number between the latest one and the one 3 months previous. e.g. if the latest index value is 304 and the one 3 months previous is 300, then the 3 month increase is 1.333333%
. . . (304/300 = 1.01333333 => [subtract 1 and multiply by 100%] => 1.333333%)
Annualized, it is 5.4%
. . . (1.01333333^4 = 1.0544095 => [subtract 1 and multiply by 100%] => 5.44095% => 5.4%).
. . . Most people just multiply the 3 month increase by 4 to annualize it: 1.333333%*4 = 5.333333% => 5.3% which isn''t technically correct (it leaves out compounding) but it is close for small percentage changes.

"Regular" is the "headline" number that has "everything"

"Core" is the regular with food and energy removed (The Fed prefers this as a basis for projecting FUTURE inflation)

Finally, the main summary table
All are seasonally adjusted and ANNUALIZED
PCE-Personal Consumption Expenditures Price Index (Fed's favorite inflation measure)
CPI-Consumer Price Index (retail)
PPI-Producer Price Index (Wholesale prices)
Links to the data are with the graphs below




Average real (i.e. inflation-adjusted) hourly earnings are up over the past 2 years and are above the pre-pandemic level:
. . . # Real average hourly earnings of production and non-supervisory workers: https://data.bls.gov/timeseries/CES0500000032
. . . # Real average hourly earnings of private sector workers: https://data.bls.gov/timeseries/CES0500000013

And now the graphs, in the following order:

* Core PCE and Regular PCE (Core PCE is the Fed's favorite for projecting FUTURE inflation)

* Core CPI and Regular CPI

* Wholesale inflation - Core PPI and Regular PPI

CORE PCE through MAY that came out 6/28/24
CORE PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPILFE
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"

This is the one that the Fed weighs most heavily. The Fed weigh the PCE more heavily than the CPI. And in both cases, they weigh the CORE measures higher than the regular headline measures for projecting FUTURE inflation



Regular PCE through MAY that came out 6/28/24
Regular PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPI
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"



CORE CPI through May that came out 6/12/24
CORE CPI (seasonally adjusted) http://data.bls.gov/timeseries/CUSR0000SA0L1E
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



The Regular aka Headline CPI through May that came out 6/12/24
Regular CPI (seasonally adjusted) https://data.bls.gov/timeseries/CUSR0000SA0
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



WHOLESALE INFLATION (PPI - the Producer Price Index)

https://www.bls.gov/news.release/ppi.nr0.htm

As for which core PPI measure, since the BLS highlights the one below in its reporting (as opposed to the one without food and energy), then I guess I should do likewise.

CORE PPI (excluding food, energy, trade services) through May that came out 6/13/24:
CORE PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD49116



===========================================================

Regular PPI through May that came out 6/13/24 ( includes "everything" ):
Regular PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD4

[mahatmakanejeeves]

3. From the source, the Bureau of Economic Analysis

EMBARGOED UNTIL RELEASE AT 8:30 a.m. EDT, Friday, June 28, 2024
BEA 24—28

Personal Income and Outlays, May 2024
Personal income income increased $114.1 billion (0.5 percent at a monthly rate) in May, according to estimates released today by the Bureau of Economic Analysis (tables 2 and 3). Disposable personal income (DPI), personal income less personal current taxes, increased $94.0 billion (0.5 percent) and personal consumption expenditures (PCE) increased $47.8 billion (0.2 percent).

The PCE price index decreased less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent (table 5). Real DPI increased 0.5 percent in May and real PCE increased 0.3 percent; goods increased 0.6 percent and services increased 0.1 percent (tables 3 and 4).

{snip}

[mahatmakanejeeves]

4. Slowing U.S. Inflation Fuels Expectations of Interest Rate Cuts

ECONOMY | CENTRAL BANKING
Slowing U.S. Inflation Fuels Expectations of Interest Rate Cuts
Inflation unlikely to accelerate as it did earlier this year, said AllianceBernstein’s Scott DiMaggio

By Paulo Trevisani
https://www.facebook.com/ptrevisani
https://twitter.com/ptrevisani
[e-mail]
Updated June 28, 2024 12:10 pm ET

The U.S. Federal Reserve’s preferred inflation gauge met forecasts in May, keeping alive expectations that interest rates could fall faster than policy makers forecast.

{snip; paywall}

[progree]

5. I dug this out of "the archives"

https://archive.is/lw6l0

... “The overall trend we’ve been seeing of disinflation in general isn’t always going to be a smooth ride,” said Kevin Flanagan, head of fixed income strategy at WisdomTree. He expects inflation to keep ticking lower in coming months. “It may be a little more difficult finding out that last mile to get to the Fed 2% goal.”

... June PCE inflation is due July 26, just ahead of the next rate-setting Fed meeting on July 30- 31.

... Inflation is unlikely to accelerate as it did earlier this year, said Scott DiMaggio, director of global fixed income at AllianceBernstein. He warned that year-over-year readings are likely to decline more slowly when compared to the weakening gauges of late 2023.

“We still have some sticky components specially on the services side and that is going to take time to move down,” he said. “We don’t see us getting back to the Fed target until 2025.”