The U.S. Department of Commerce released its report indicating that the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, experienced a rebound in October. The PCE Price Index increased by 2.3% year-over-year, meeting expectations, and rose 0.2% month-over-month, consistent with forecasts.
The core PCE Price Index, which excludes food and energy, climbed 2.8% year-over-year, aligning with predictions, and increased by 0.3% month-over-month. The primary driver of October's inflation was a 0.4% rise in service prices, while goods prices decreased by 0.1%. Food prices remained stable, and energy prices saw a slight decline of 0.1%. Despite expectations of a slowdown in inflation due to falling rents, housing-related costs continued to push inflation higher, with a 0.4% increase in October.
The Federal Reserve targets a 2% annual inflation rate. Since March 2021, U.S. PCE inflation has consistently exceeded this level, peaking at around 7.2% in June 2022, prompting aggressive interest rate hikes by the Fed. Although inflation has significantly declined since the Fed began tightening monetary policy, it remains a critical issue for households and a significant topic in the U.S. presidential race. The cumulative impact of inflation over the past two years has severely affected consumers, particularly those with lower wages.
Consumer spending remained robust in October but showed a slight decline compared to September. Personal Consumption Expenditures rose 0.4% month-over-month, in line with expectations but lower than September's 0.5%. Real personal consumption expenditures increased by 0.1%, below the anticipated 0.2% rise and September's 0.4% increase. Personal income saw a significant rise of 0.6% month-over-month, surpassing the expected 0.3% increase.
The personal savings rate fell to 4.4% in October, matching its lowest level in January 2023. Following the PCE inflation data release, U.S. stock markets showed mixed reactions, with indices like the Nasdaq 100, heavily composed of tech stocks, exhibiting notable movement.
