PCE Rose at 3.2% Annual Rate in November, Less than Expected

Highlights

• PCE Price Index up by 0.1%, Income Rises 0.4%
• Service Spending Increases, Goods Spending Declines
• Saving Rate at 4.1%, Reflecting Consumer Caution

Inflation Measures and Consumer Behavior

In November 2023, key economic indicators showed mixed signals in the U.S. economy. The personal consumption expenditures (PCE) price index, a critical inflation measure used by the Federal Reserve, witnessed a modest increase of 0.1% for the month. This increment aligns with the central bank’s inflation target, indicating a gradual move towards economic stability.

Income and Expenditure Patterns

Personal income in the U.S. rose significantly by 0.4%, or $81.6 billion, reflecting a robust economic momentum. Disposable personal income (DPI) mirrored this growth, increasing by the same margin. Despite inflationary pressures, personal consumption expenditures (PCE) also grew, albeit at a slower rate of 0.2%, signifying continued consumer spending resilience.

PCE Price Index and Real Income Insights

The overall PCE price index experienced a slight decrease of 0.1%, while the core index, excluding food and energy, increased by 0.1%. This divergence suggests varying inflation pressures across different sectors. Additionally, both Real DPI and real PCE showed an increase of 0.4% and 0.3%, respectively, indicating balanced growth in income and spending.

Sector-Specific Spending and Savings

A closer look at November’s expenditure reveals a $58.8 billion increase in service spending, offset by a $12.1 billion decrease in goods spending. Key contributors to this shift included rising costs in housing, utilities, and food services. Despite these changes, personal savings remained high at $839.8 billion, with a saving rate of 4.1%.

Economic Outlook

The current data suggests a cautiously optimistic short-term outlook for the U.S. economy. The balanced growth in DPI and PCE points to a stable economic environment, but the mixed signals in price changes, especially the contrasting trends in goods and services, hint at sector-specific economic challenges ahead. This landscape indicates a nuanced economic path as the U.S. navigates through inflationary pressures and consumer spending trends.