June saw a modest increase in U.S. prices as the cost of goods declined and the cost of services rose, highlighting a better inflation environment that may pave the way for the Federal Reserve to start reducing interest rates in September.
The Commerce Department's data, released on Friday, also revealed a slowdown in consumer spending last month. Fed policymakers may become more confident that inflation is heading towards the 2% objective set by the US central bank if they observe indications of decreasing price pressure and declining demand.
"Inflation continues to moderate and is slowing approaching the Fed's target," said Jeffrey Roach, chief economist at LPL Financial. "At the upcoming meeting, we should expect the Fed to highlight the slowdown in hiring as one reason to cut rates at the September meeting."
The Fed's next policy meeting is scheduled for July 30-31.
After remaining steady in May, the personal consumption expenditures (PCE) price index increased by 0.1% last month, according to a report from the Bureau of Economic Analysis of the Commerce Department. Prices for goods fell by 0.2% following a 0.4% decline in May.
The cost of cars and their parts decreased by 0.6%. Prices for durable household appliances and furnishings fell for a third consecutive month, but the cost of other long-lasting manufactured products increased by 1.8%.
Following a 3.4% decline in May, the price of petrol and other energy-related items fell by 3.5%. For a second consecutive month, there were discounts on apparel and footwear.
However, the 0.2% increase in service costs matched May's gain. The cost of housing and utilities increased, albeit at a slower rate than in the past months.
Costs for insurance and financial services increased as well, although for the third consecutive month, transport service prices decreased.
NatWest's stock rises as earnings surpass forecasts.
Through June of this year, the PCE price index increased by 2.5%. This was the lowest year-over-year increase in four months, coming after a 2.6% increase in May.
With food and energy out of the picture, the PCE price index increased by 0.2% in the previous month. That came after a 0.1% unrevised rise in May. The so-called core PCE inflation increased 2.6% in the 12 months ending in June, mirroring May's increase.
According to Reuters surveyed economists, June's core and monthly headline PCE inflation rates will both increase by 0.1%. Some economists increased their core PCE price index forecast to 0.2% after the publication of gross domestic product data on Thursday, which showed core inflation growing somewhat faster than anticipated in the second quarter. There was minimal variation in the headline PCE inflation forecasts.
In reaction to the Fed's strong monetary policy tightening in 2022 and 2023, demand in the economy has decreased. In the first half of this year, economic growth averaged 2.1%, but in the second half of 2023, it was 4.2%.
Following the announcement of the inflation statistics, the dollar saw a modest decline versus a basket of currencies and U.S. Treasury rates began to trade lower.
Since last July, the U.S. central bank has kept its benchmark overnight interest rate within the current range of 5.25% to 5.50%. Since 2022, it has increased its policy rate by 525 basis points.
Financial markets are projecting three rate reductions this year, beginning in September, due to declining inflation and improving labour market circumstances.
According to the Commerce Department data, consumer spending—which makes up over two-thirds of the U.S. economic activity—rose 0.3% last month following a 0.4% gain in May.
After increasing by 0.4% in May, consumer expenditure increased by 0.2% when inflation was taken into account. Given that income growth has stalled, spending is probably going to stay moderate.
After increasing by 0.4% in May, personal income increased by 0.2% in June. After increasing by 0.6% in May, wages increased by 0.3%. The rate of saving decreased from 3.5% in May to 3.4% now.
The economy was growing at a 2.8% annualised rate, which was twice as fast as the 1.4% pace of growth in the first quarter, according to the early second-quarter GDP report that contained the statistics.
(Sourec:www.channelnewsasia.com)
The Commerce Department's data, released on Friday, also revealed a slowdown in consumer spending last month. Fed policymakers may become more confident that inflation is heading towards the 2% objective set by the US central bank if they observe indications of decreasing price pressure and declining demand.
"Inflation continues to moderate and is slowing approaching the Fed's target," said Jeffrey Roach, chief economist at LPL Financial. "At the upcoming meeting, we should expect the Fed to highlight the slowdown in hiring as one reason to cut rates at the September meeting."
The Fed's next policy meeting is scheduled for July 30-31.
After remaining steady in May, the personal consumption expenditures (PCE) price index increased by 0.1% last month, according to a report from the Bureau of Economic Analysis of the Commerce Department. Prices for goods fell by 0.2% following a 0.4% decline in May.
The cost of cars and their parts decreased by 0.6%. Prices for durable household appliances and furnishings fell for a third consecutive month, but the cost of other long-lasting manufactured products increased by 1.8%.
Following a 3.4% decline in May, the price of petrol and other energy-related items fell by 3.5%. For a second consecutive month, there were discounts on apparel and footwear.
However, the 0.2% increase in service costs matched May's gain. The cost of housing and utilities increased, albeit at a slower rate than in the past months.
Costs for insurance and financial services increased as well, although for the third consecutive month, transport service prices decreased.
NatWest's stock rises as earnings surpass forecasts.
Through June of this year, the PCE price index increased by 2.5%. This was the lowest year-over-year increase in four months, coming after a 2.6% increase in May.
With food and energy out of the picture, the PCE price index increased by 0.2% in the previous month. That came after a 0.1% unrevised rise in May. The so-called core PCE inflation increased 2.6% in the 12 months ending in June, mirroring May's increase.
According to Reuters surveyed economists, June's core and monthly headline PCE inflation rates will both increase by 0.1%. Some economists increased their core PCE price index forecast to 0.2% after the publication of gross domestic product data on Thursday, which showed core inflation growing somewhat faster than anticipated in the second quarter. There was minimal variation in the headline PCE inflation forecasts.
In reaction to the Fed's strong monetary policy tightening in 2022 and 2023, demand in the economy has decreased. In the first half of this year, economic growth averaged 2.1%, but in the second half of 2023, it was 4.2%.
Following the announcement of the inflation statistics, the dollar saw a modest decline versus a basket of currencies and U.S. Treasury rates began to trade lower.
Since last July, the U.S. central bank has kept its benchmark overnight interest rate within the current range of 5.25% to 5.50%. Since 2022, it has increased its policy rate by 525 basis points.
Financial markets are projecting three rate reductions this year, beginning in September, due to declining inflation and improving labour market circumstances.
According to the Commerce Department data, consumer spending—which makes up over two-thirds of the U.S. economic activity—rose 0.3% last month following a 0.4% gain in May.
After increasing by 0.4% in May, consumer expenditure increased by 0.2% when inflation was taken into account. Given that income growth has stalled, spending is probably going to stay moderate.
After increasing by 0.4% in May, personal income increased by 0.2% in June. After increasing by 0.6% in May, wages increased by 0.3%. The rate of saving decreased from 3.5% in May to 3.4% now.
The economy was growing at a 2.8% annualised rate, which was twice as fast as the 1.4% pace of growth in the first quarter, according to the early second-quarter GDP report that contained the statistics.
(Sourec:www.channelnewsasia.com)
