Fed's Preferred Measure of Underlying Inflation Jumps

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Bloomberg Oct 27, 2023 17:20 · 10.7k Views

The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.3% in September, according to the Bureau of Economic Analysis report. Inflation-adjusted consumer spending jumped 0.4% last month. Mike McKee reports on "Bloomberg Surveillance."

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Transcript

  • 00:00 And here come the numbers and we'll start with the inflation numbers.
  • 00:04 They come in hotter than anticipated, up 4/10 of a percent, I don't know month over month basis for the headline.
  • 00:10 The core comes in up a 3/10, which is
  • 00:14 about what was expected, although there was some leaning towards maybe a little lower number year over year.
  • 00:20 Now we see the PCE headline number at 3.4%, that's down from 3/5
  • 00:25 and the core comes in at 3-7, down from three nine, both of those expected.
  • 00:31 All the people who like to dive into all those numbers and figure out what
  • 00:35 actually changed will be with us
  • 00:39 in a few seconds.
  • 00:40 Personal income up 3/10, that's lower than the prior month of 4/10 gain, but
  • 00:45 also lower than what was anticipated 4/10 gain.
  • 00:49 Spending up 7/10, I mean that's strong on the back of that, on the back of that GDP and the consume, well, this number is in the GDP because this is a September number.
  • 00:58 It was the
  • 00:59 third month of the quarter.
  • 01:00 So
  • 01:01 economists had sort of backed out the numbers and anticipated that this would be fairly strong.
  • 01:05 We were up 4/10
  • 01:07 the prior month.
  • 01:07 The question is now
  • 01:09 do we continue to see that
  • 01:11 spending
  • 01:13 happen?
  • 01:13 Because
  • 01:14 if incomes are falling behind
  • 01:16 and they have been the spending levels over the last couple of months, that would suggest that maybe there's a
  • 01:21 a pullback ahead.
  • 01:23 Saving savings rate comes in at 3.4%.
  • 01:25 People have been watching that for some indication of whether or not they're going to run out of money.
  • 01:29 The American consumer, that's down from 4% and it's been a steady decline.
  • 01:33 But
  • 01:34 historically, before the pandemic,
  • 01:37 we used to say people spend what they make.
  • 01:39 They don't
  • 01:40 dip into savings the way people tend to think they do.
  • 01:44 And so
  • 01:45 if that's the case, then there's more of a case now for
  • 01:48 maybe a slowdown.
  • 01:49 People
  • 01:50 don't have as much to dip into if they wanted to, but they're also not making as much as they were.
  • 01:56 Services spending went up 8 tenths, whereas good spending went up.
  • 01:59 7/10.
  • 02:00 It was always a story about people switching away from goods, but they still seem to be spending a lot on goods.
  • 02:06 Services don't go into the retail sales numbers that we got earlier this month, except for bars and drinking places
  • 02:12 fitting your theme.
  • 02:13 But
  • 02:14 eight tenths of a percent gain for service is pretty strong, so it looks like
  • 02:19 people were spending money during the third quarter on all sorts of things.