US inflation on 17 years top
Consumer spending was down 0.4%, the largest decline since June 2004. Inflation-adjusted spending has fallen for the last two months, the first time this has happened since September 2005.
Personal consumption expenditures rose
0.2% in July. The drop in consumption reflected a 1.6% decline in
purchases of durable goods. Commerce said a decline in purchases in
autos and auto parts accounted for most of July's decline. Purchases
of nondurable goods fell 0.9% in July.
Personal income fell 0.7%, well below
the 0.1% decline economists were expecting and the largest decline
since August 2005. Adjusting for inflation, personal income fell 1.7%
in July following a 2.6% drop in June. Inflation as measured by the
core Personal Consumption Expenditure index, which excludes food and
energy, rose 0.3% as expected in July, the same as June. The headline
PCE price index was up 0.6%, lower than the downwardly revised 0.7%
in June.
Over the last year, the core PCE index
has risen 2.4%, the highest since February 2007 and above than the
Fed's comfort zone of 1.5 to 2.0%. The headline PCE index is up 4.5%
over the last 12 months, the highest since February 1991. The
personal savings rate for July was 1.2%, down from 2.5% in June.
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