The January Personal Income and Outlays report was published today by the Bureau of Economic Analysis. The chart below shows the monthly year-over year change in the personal consumption expenditures — PCE — price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is a key measure watched by the Fed as a gauge of inflation.
The Headline PCE index has increased slightly in its annualized rate from 1.18% to 1.22% over the past month. The Core PCE index also increased slightly from 0.77% to 0.81%.
I’ve expressed the index change to two decimal points to highlight the change more accurately. Case in Point: Last month’s annualized Core CPE expressed to one decimal was 0.7%, the smallest increase on record. To two decimal places it was 0.74%. This month the December Core PCE was revised upward to 0.77%, which rounds to 0.8%. December still holds the record for the Core PCE low, but that distinction is lost at one decimal place because the January Core at 0.81% rounds down to an identical 0.8%.
It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision). But PCE is a key measure of inflation for the Federal Reserve, and the recent price increases in oil and gasoline puts consumer behavior in the spotlight.
For a long-term perspective, here are the same two metrics spanning five decades.
(Note: I use the data from Table 9 in the full release and tables available here.)
Doug Short Ph.d is the author of dshort.com.
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