U.S. Core PCE Price Inflation Picks Up in February; Real Spending Gain Eases

The PCE chain price index rose 0.3% during February for the third straight month. The y/y rise held steady at 2.5%. The price index excluding food & energy strengthened 0.4% last month after increases of 0.3% in January, 0.2% in December and 0.1% in November. The y/y change rose to 2.8% last month from 2.7% in January, where it has fluctuated since last April.

Durable goods prices rose 0.4% (-0.9% y/y) in February, after a 0.3% January rise. Motor vehicle & prices edged 0.1% higher (-0.1% y/y) following a 0.9% surge. Recreational product prices improved 0.5% (-2.4% y/y) last month, after increasing 0.7% in January, while home furnishings & appliance costs rose 0.3% (-2.0% y/y) after a 0.1% uptick in January.

Prices of nondurable goods ticked 0.1% higher (1.0% y/y) last month after rising 0.6% in January. Gasoline & oil prices held back the overall increase and declined 0.8% (-3.7% y/y) after a 2.0% rise in January. Clothing prices rose 0.4% (0.5% y/y) after falling 1.2%. The cost of food & beverages eased slightly (+1.5% y/y) after rising 0.3%.

Services prices increased 0.4% (3.5% y/y) in February, after rising 0.3% in January. Housing & utility prices rose 0.4% (4.2% y/y) after two straight 0.3% gains, and services prices excluding energy & healthcare increased 0.4% (4.1% y/y) for the third straight month. Recreation services costs strengthened 1.0% (3.9% y/y) after a 1.1% January increase. Healthcare prices rose 0.3% (1.9% y/y) after a 0.2% decline. Transportation prices fell 0.2% (+3.7% y/y) after declining 0.3% in January while hotel & restaurant prices rose 0.4% (3.3% y/y), the same as in January.

Personal consumption expenditures (PCE) increased 0.4% (5.3% y/y) in February after a 0.3% decline in January, revised from down 0.2%. A 0.6% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE rose 0.1% (2.7% y/y) after falling 0.6% in January, revised from down 0.5%.

Real spending on durable goods increased 1.0% (4.5% y/y) in February, after a 4.6% January drop. Real spending on motor vehicles rose 1.6% (3.7% y/y), after an 8.8% pull-back. Real outlays on furnishings & appliances rose 0.7% (5.8% y/y) last month and cut into January’s 2.0% gain. Real spending on recreational goods & vehicles rose 1.0% (6.5% y/y) last month, after falling 3.2% in January. Spending on “other” durable goods slipped 0.1% (unchanged y/y) after declining 0.9% in January.

Nondurable goods spending in real terms rose 0.5% (3.1% y/y) in February following a 0.8% decline. Real clothing and footwear purchases eased 0.1% (+1.8% y/y) last month, following a 0.2% gain in January. Real food & beverage purchases improved 0.7% (2.4% y/y) and reversed January’s decline. Real outlays on gasoline & other energy products fell 0.6% (+5.1% y/y), after strengthening 0.7%. Real spending on “other” nondurable goods rose 0.8% (3.7% y/y) last month, following a 1.7% January decline.

Real spending on services eased 0.1% (+2.3% y/y) in last month, following a 0.1% January increase. Real spending on housing & utilities fell 0.2% (+1.8% y/y) in January, after increasing 0.6%, while real health care spending rose 0.1% (4.2% y/y) for the second straight month. Real spending on food services & accommodations weakened 1.4% (-0.9% y/y), after rising 0.1% during January. Real spending on financial services & insurance rose 0.5% (2.1% y/y) after holding steady. Real spending on transportation services rose 0.6% (4.7% y/y) in February, after easing slightly in January. Recreation spending improved 0.1% (2.9% y/y) after rising 0.2% in January. A 0.3% rise (2.6% y/y) in spending on “other” services followed a 0.3% improvement in January.

Personal income rose 0.8% (4.6% y/y) after gaining 0.7% in January, revised from 0.9%. A 0.4% gain was expected. Wages & salaries rose 0.4% (3.5% y/y) last month, after a 0.2% rise. Rental income improved 0.9% (4.4% y/y), after rising 0.7% in January. Proprietors’ income moved 0.1% higher (3.9% y/y), following a 0.1% January slip. Income from assets rose 0.4% (2.7% y/y), after rising 1.2%, and current transfer receipts strengthened 2.2% (8.5% y/y) in February, after rising 1.8% in January. Government social benefits also rose 1.8% (7.9% y/y) in February, the same as in January.

Disposable personal income increased 0.9% (4.4% y/y) following a 0.7% January rise, revised from 0.9%. After adjusting for price changes, disposable income rose 0.5% in February following a 0.3% increase. The y/y increase recovered to 1.8% from 1.3% in January.

The personal saving rate rose to 4.6% in February, after rising to 4.3% in January. It began 2024 at 5.5%. Personal saving rose 7.7% (-11.0% y/y) in February, after surging 30.7% in January.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.