Headline gauge accelerates as core pressure persists
The Federal Reserve's favored inflation measure picked up speed in September after sitting at 3.0% for three straight months, according to Bureau of Economic Analysis figures. The headline Personal Consumption Expenditure price index climbed 3.6% compared with a year earlier, the quickest annual rate since May. Stripping out food and energy, the core index advanced 3.1% over twelve months, slightly above the prior month's 3.0%.[S1][S2][S3][S4][S5][S6][S7]
Core PCE has not dropped below 3.0% since the Iran conflict began, a sign that underlying price pressure remains even when volatile energy costs are set aside. That persistence matters for a central bank trying to bring inflation down to 2%, because it suggests the slowdown is not simply a matter of energy prices easing.[S1]
Spending outpaces income and savings thin out
Consumer spending increased 0.5% in September, yet real spending, which removes the effect of inflation, did not change. Personal income grew 0.2%, supported by higher compensation and government social benefits. Real disposable income, adjusted for taxes and inflation, declined 0.3%. Measured over a year, personal income was 4.1% higher and real disposable income was up 1.0%.[S1][S7]
Because spending grew faster than income, the personal saving rate slipped to 3.8% in September, the weakest reading since November 2022. Apart from July, the saving rate has drifted lower throughout the year. Elevated energy prices, rather than rising incomes, have been pushing spending higher, according to the report.[S1][S6]
