The cost of living for consumers is going up again.
According to data released this week by the Bureau of Economic Analysis, the personal consumption price index (PCE) increased 3.3% in July compared to the same month last year. This is the first time that PCE inflation has gone up since April, and it comes after June’s rate of 3%.
Compared to a month ago, the PCE price index went up by 0.2%, which is the same as June and more than May’s 0.1% gain. Before the numbers were rounded, month-to-month inflation actually went up, from 0.205 percent in June to 0.213 percent in July.
Prices for services went up by 0.4% for the month, while prices for goods went down by 0.3%. Food prices went up by 0.2%. The price of energy went up by 0.1%.
Core PCE inflation, which doesn’t include the prices of food and energy, rose by 4.2% on a yearly basis, which is more than the 4.1 percent rise seen in June. Core PCE prices went up 0.2 percent month-to-month, which is the same as June after rounding and just a bit more than June before rounding.
The PCE price index is used by the Federal Reserve to set its inflation goal of 2% and to publish the public predictions of Fed members after every other meeting. It is like the more well-known consumer price index, but the weights given to different types of spending are different. The PCE index additionally takes into account spending by charities and prices that aren’t directly paid by customers, like health care costs covered by employers. The PCE index also shows how customers change what they spend their money on as costs change.
Investors were glad that inflation hadn’t gone up even more, which made futures tied to the major markets go up before the opening bell this week.
The rise in the PCE price index indicates that there are still significant obstacles in the way of the Fed’s efforts to reduce inflation to its two percent objective and that the path to reduced inflation will not be easy or straightforward.