The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 2.6% in December from the previous year, driven by higher energy and food prices. While core PCE inflation, which excludes volatile food and energy costs, remained steady at 2.8%, consumer spending surged 0.7% in December, exceeding expectations. This increase in spending, coupled with a declining savings rate, raises concerns about the sustainability of the current economic trajectory.
The Federal Reserve’s preferred inflation gauge moved even higher in December, driven largely by rising energy prices as well as food. However, a closely watched measurement of underlying inflation trends indicated some progress in the fight to rein in price hikes. The Personal Consumption Expenditures price index rose 2.6% in December from the year before, heating up from November’s 2.4% increase, according to new Commerce Department data released Friday. On a monthly basis, prices rose 0.
7% from November, exceeding economists’ expectations for a 0.5% gain. With Thanksgiving landing late in November, the holiday shopping season was largely concentrated in December; however, economists also believe consumers are buying more durable goods in anticipation of tariffs that have been threatened by President Donald Trump. Purchases of TVs, technology products and autos have notably surged, Samuel Tombs, Pantheon Macroeconomics’ chief US economist, wrote in a note to clients on Friday.
Inflation PCE Price Index Core PCE Consumer Spending Savings Rate
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