The PCE price index excluding food and energy, also known as the core PCE price index (core PCE), is released as part of the monthly Personal Income and Spending Report of Americans - we just learned its latest value.
The core index makes it easier to see the trend of inflation by excluding two categories: food and energy, where prices tend to fluctuate the most. The PCE core price index is closely watched by the Federal Reserve when conducting monetary policy. U.S. PCE inflation, which excludes food and energy, rose 0.3 percent month-over-month in April 2022, the same as the previous month and in line with market expectations. The annual rate, meanwhile, fell to a 4-month low of 4.9 percent from 5.2 percent the previous month. Core PCE inflation appears to have peaked in February at 5.3 percent, while core PCE inflation including the most volatile prices was 6.3 percent in April, up from 6.6 percent in March. Inflation reflects increases in both goods and services prices. Energy prices rose 30.4 percent and food prices increased 10.0 percent on an annualized basis.
U.S. personal income rose 0.4 percent in April 2022 from the previous month, following a 0.5 percent increase in March and below market expectations of 0.5 percent. Wage growth reflected increases in both private and government sector payrolls. In contrast, U.S. personal spending rose 0.9 percent month-over-month in April 2022, following an upwardly revised 1.4 percent increase in March and beating market expectations of 0.7 percent, indicating that consumers continue to spend despite rising prices. Spending on goods and services varied widely, led by motor vehicles and parts, food services and lodging, and housing and utilities, while spending on gasoline and other energy goods fell.
From the above data, it may appear that, at least in the short term, inflation in the United States may have peaked and there may be stabilization in price increases. Such information could be beneficial for Wall Street, where this week stock indexes may break their previous bad streak. Following the release of the data, stock market investors seem to be more optimistic about the US indices.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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