NEW YORK, March 13 (Yonhap) – Underlying U.S. inflation remained sticky in January, with the Federal Reserve’s preferred gauge holding above 3%, underscoring persistent price pressures even before the latest Middle East shock while real consumer spending showed only marginal growth.
The Commerce Department said Friday that the personal consumption expenditures (PCE) price index rose 2.8% in January from a year earlier, slightly below the 2.9% increase expected by economists surveyed by Dow Jones. On a month-on-month basis, the index climbed 0.3%, matching forecasts.
The core PCE price index, which strips out volatile food and energy costs and is viewed as a better barometer of underlying inflation, increased 3.1% year-on-year and 0.4% from December, both in line with expectations. While the headline PCE inflation rate eased from 2.9% in December, the core rate ticked up from 3.0%, signaling renewed firmness in underlying price dynamics.
Core PCE had decelerated to as low as 2.6% in April last year but has since moved gradually higher, pointing to a re-acceleration in underlying inflation pressures. The latest reading indicates the U.S. economy was already facing renewed inflationary momentum even before the U.S. and Israel launched airstrikes on Iran on Feb. 28, which sent global oil prices sharply higher.
The PCE price index tracks prices paid by U.S. residents for a broad basket of goods and services and is the Fed’s primary inflation benchmark for its 2% target, preferred over the more widely cited Consumer Price Index (CPI). The January data do not yet capture the impact of the late-February spike in crude prices, suggesting further upside risks to upcoming inflation prints.
On the demand side, nominal personal consumption expenditures rose 0.4% in January from the previous month, beating market expectations for a 0.3% gain. After adjusting for inflation, however, real personal consumption expenditures increased just 0.1%, matching December’s tepid 0.1% rise and highlighting a pattern of subdued real spending growth.
Personal income rose 0.4% on the month, slightly weaker than the 0.5% increase economists had forecast, potentially constraining household purchasing power if price pressures persist.
The January PCE report had originally been scheduled for release on Feb. 26 but was delayed due to disruptions stemming from last year’s U.S. federal government shutdown. The combination of a re-firming core inflation trend and soft real consumption is likely to complicate the Fed’s decision on when to begin cutting interest rates, with policymakers balancing the risk of entrenched inflation against signs of cooling in underlying demand.
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