U.S. Core PCE Price Inflation Moves Up in June; Real Spending Improves

Price Index Strengthens The PCE chain price index increased 0.3% (2.6% y/y) during June after rising 0.2% in May and 0.2% in April, both revised up from 0.1%. The y/y gain rose to 2.6% after a 2.4% increase in May. It was the strongest rise in four months, up from 2.2% in April. Energy prices rose 0.9% (-1.6% y/y) after falling 1.0% in May, while food prices rose 0.3% (2.2% y/y) following a 0.2% rise. The price index excluding food & energy rose 0.3%, after two straight 0.2% increases. The y/y increase held steady at 2.8% last month, and remained near the slowest since March 2021.

Durable goods prices rose 0.5% (0.9% y/y) in June, after holding steady in May. Home furnishings & appliance prices jumped 1.3% (2.1% y/y), after increasing 0.6%. Recreational goods & vehicle costs strengthened 0.9% (0.8% y/y) following a slight easing in May. Motor vehicle & parts prices slipped 0.4% (+0.7% y/y), after a 0.1% May decline.

Prices of nondurable goods rose 0.4% (0.5% y/y) last month after a 0.1% May improvement. Gasoline & other energy prices increased 0.9% (-8.0% y/y), after falling 2.2% in May. Clothing prices rose 0.4% (-0.3% y/y) after falling 0.4% in May. Food & beverage prices rose 0.3% (2.2% y/y) following a 0.2% May increase.

Services prices in June rose 0.2% (3.5% y/y) in June for the fourth straight month. Housing & utility prices rose 0.3% (4.4% y/y), the same as in May, and services prices excluding energy & healthcare gained 0.2% (3.7% y/y) for the second straight month. Healthcare prices strengthened 0.4% (2.4% y/y), after a 0.1% uptick. The cost of financial services & insurance rose 0.4% (5.1% y/y) after falling 0.2% in May. Recreation services costs edged 0.1% higher (3.7% y/y) after falling 0.3%. Transportation prices eased 0.1% (+4.3% y/y), after holding steady In May, while hotel & restaurant prices eased slightly (+2.9% y/y) after rising 0.3% in May.

Personal Spending Firms Personal consumption expenditures (PCE) rose 0.3% (+4.7% y/y) in June after holding steady in May, revised from -0.1%. The rise compared to expectations for a 0.4% increase in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.1% in June (2.1% y/y) after falling 0.2% in May.

Real spending on durable goods declined 0.5% (+3.5% y/y) in June, after dropping 1.8% in May. Real spending on motor vehicles eased 0.4% (+7.1% y/y), after falling 5.5% in May. Real outlays on furnishings & appliances eased 0.7% (+1.1% y/y), off for the third straight month. Real spending on recreational goods & vehicles fell 0.6% (+2.2% y/y) last month, after rising 1.1% in May. Spending on “other” durable goods eased 0.1% (+1.8% y/y) after rising 0.7% in May.

Nondurable goods spending in real terms rose 0.4% (2.7% y/y) in June after falling 0.3% in May. Real clothing & footwear purchases rose 0.3% (4.2 y/y) last month, following a 1.2% jump during May. Real food & beverage purchases rose 0.2% (1.3% y/y) and reversed the 0.2% decline in the prior month. Real outlays on gasoline & other energy products rose 1.9% (1.7% y/y), after falling 2.6%. Real spending on “other” nondurable goods improved 0.2% (3.7% y/y) last month, following two straight months of 0.3% decline.

Real spending on services roughly improved 0.1% (1.7% y/y) in June for the third straight month. Real spending on housing & utilities rose 0.1% (1.0% y/y) in June, for a second consecutive month, while real health care spending also rose 0.1% (4.7% y/y) after rising 0.2%. Real spending on food services & accommodations increased 0.2% (1.5% y/y), after falling 0.2% in May. Real spending on financial services & insurance rose 0.2% (2.5% y/y) after falling 0.3%. Real spending on transportation services weakened 0.3% (-2.3% y/y) in June, after edging 0.1% higher in May. Recreation spending fell 0.7% (-0.3% y/y), after rising 0.9% in May. Spending on “other” services held steady (+2.3% y/y) for the second straight month.

Income Growth Improves Personal income rose 0.3% last month (4.7% y/y) after falling 0.4% in May. A 0.2% gain was expected. Wages & salaries edged 0.1% higher (4.8% y/y), following a 0.3% increase during May. Rental income declined 0.4% (+3.8 y/y) in June, after falling 0.5% in May. Proprietors’ income improved 0.2% (2.3% y/y), after tumbling 2.6%. Income from assets held steady (+1.0% y/y), after rising 0.2% during May, and current transfer receipts rose 1.0% (8.6% y/y) following a 2.0% May decline.

Disposable personal income increased 0.3% (4.3% y/y) during June following a 0.5% May decline. After adjusting for price changes, disposable income eased slightly (+1.7% y/y) after falling 0.7% in May.

The personal saving rate held steady in June at 4.5%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 0.8% (-2.2% y/y) in June, after declining 9.8% in May.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.