A US inflation measure closely watched by the Federal Reserve remained at its highest level in about three decades, while consumer spending rebounded last month despite the spread of the Delta variant of Covid-19.
The commerce department’s core personal consumption expenditure index, which strips out volatile food and energy costs, rose 3.6 per cent last month compared with a year ago. That was in line with consensus forecasts at the level it has been for three months and matching the highest level since the 1991. From the previous month core PCE rose 0.3 per cent.
The broader PCE gauge was up 4.3 per cent year-on-year, the highest since January 1991.
The data comes as the US central bank pushes ahead with a reduction of its stimulus programme that could come as soon as November and as a growing number of Fed officials expect an interest rate rise next year.
The central bank’s 2 per cent inflation target has already been met as supply chain issues along with strong consumer demand have driven prices higher, and economists argue that price pressures will ease as bottlenecks resolve.
Friday’s report also showed US consumer spending rose 0.8 per cent last month, following a 0.1 per cent decrease in July. Americans boosted spending on goods and services, including foods and drinks, healthcare, and personal care and clothing services as they continued to dine out. However, spending on cars and parts declined.
“A surge in Covid infections, deficient inventories and elevated prices constrained consumer spending at the end of the summer,” said Lydia Boussour, economist at Oxford Economics. “Still, consumers are not retrenching,” she added.
The rise in spending came as personal incomes climbed 0.2 per cent, missing expectations for a 0.3 per cent rise and following a 1.1 per cent increase in July.
Incomes were boosted by higher wages and salaries from private employers as well as government benefits such as advance child tax credit payments, which was partially offset by a decline in extended federal unemployment aid.
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