The new frightening inflation data is hopes to become better due to a decrease in the rate of wage growth.
According to the Bureau of Economic Analysis, the personal consumption expenditure index, increased by 0.3% from August to September, but remained unchanged at 62%.
The latest PCE, which excludes all volatile prices and products and energy carriers from calculations grew by 5.1% over the year, which is higher than the figure that was 4.9% in August, but it is specified that it is below the consensus estimate of 5.2%.
According to experts, in the eighth to ninth months, the root index increased by 0.5%, the jump that occurred in the previous month was revised downward by 0.1% from 0.6%.
A slowdown in wage growth and quarterly salaries was indicated by the Bureau of Statistics. The central Bank is closely monitoring exactly how and to what extent an increase in the inflation rate can affect the level of wages and fuel inflation.
In a statement, Gregory Daksch, senior economist at EY Parthenon, said that the Federal Reserve system needs to take a whole range of measures to reduce demand and inflation, as well as keep policymakers on the path of raising the federal funds rate by another 75 basis points at the FOMC meeting next week. An increase of certain root indicators by 75 root points may be the last of the scale.
The normal position of inflation from the present “worst” one will return only in the spring of 2024. Consumers’ struggle continues: prices are stuck at the 1980s level; inflation has spread on all kinds of goods.
According to the latest PCE report, Americans are used to spending more than they receive – expenses increased by 0.6%, and incomes by only 0.4%, and this is happening even despite the constantly rising inflation rate.
According to the latest survey data released on Friday, the University of Michigan consumer sentiment index for October was 59.9. This is only 10 points above the historical low reached in June.
According to Joanne Hsu, director of research, durable goods purchasing conditions are up 23 percent this month however, business conditions are expected to worsen by 19 percent this year.
“These different models reflect significant uncertainty about inflation, policy responses and global developments, with consumer opinions consistent with an impending recession in the economy.” Outside of the consumer sector, the broader economic situation is deteriorating, Darko said.
A rise in interest rates, persistent high inflation and increased global uncertainty worsen business confidence and force companies to make hiring and investment decisions more carefully. The full economic impact of the FED policy tightening remains to be seen despite the succumbing housing market.
Main Sources: https://edition.cnn.com/2022/10/28/economy/us-pce-inflation-september/index.html
