The Fed’s preferred inflation gauge cooled last month, but consumer spending sank
CNN
The Federal Reserve’s preferred inflation gauge cooled as expected in January; however, the good news came with a red flag for the US economic engine: Consumers pulled back their spending by the most in nearly four years.
The Federal Reserve’s preferred inflation gauge cooled as expected in January; however, the good news came with a red flag for the US economic engine: Consumers pulled back their spending by the most in nearly four years. The Personal Consumption Expenditures price index rose 2.5% in January from the year before, slowing from December’s 2.6% annual rate, according to Commerce Department data released Friday. Consumer spending was expected to drop off in January: There’s typically a post-holiday expenditure hangover to start the year; plus, last month’s retail sales data came in far below forecasts. But consumers pulled back far more than economists expected. Spending fell 0.2% for the month from December, adjusted for inflation, spending sank 0.5%. Those are the biggest monthly drops since February 2021. The cost of food (especially eggs) and energy pushed up the Consumer Price Index and Producer Price Index readings for January. That had economists expecting PCE would rise about 0.3% from December but that the annual rate would slow to 2.5% from the initially reported 2.6%, FactSet estimates show. This story is developing and will be updated.
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