The Commerce Department reported on Thursday that the personal consumption expenditures (PCE) price index declined by 0.1 percent in June, following an upwardly revised 0.5 percent rise in May. Economists had forecasted a similar 0.1 percent drop.
The annual growth in the PCE price index eased to 3.7 percent in June from 4.1 percent in May, remaining consistent with forecasts. The month’s decline in consumer prices was driven by a 0.6 percent drop in goods prices, particularly in gasoline and other energy-related items, which fell 9.2 percent. Service prices moved up slightly, by 0.1 percent.
Core PCE, which strips out volatile food and energy, increased by 0.1 percent in June, following a 0.3 percent rise in May. That fell just short of the 0.2 percent expected by economists. The annual core PCE growth rate declined slightly to 3.3 percent from 3.4 percent.
Bernard Yaros, lead U.S. economist at Oxford Economics, called the June data encouraging, noting that the core PCE index came in a touch lower than expected. He predicted that while inflation will stay above 3 percent through the second half of the year, favorable conditions could lead to a prolonged pause in rate hikes by the Federal Reserve.
The Commerce Department also reported that personal income rose by 0.2 percent in June, following a 0.7 percent gain in May. That was just below the 0.3 percent expected by economists. Personal spending climbed by 0.3 percent, in line with estimates. Disposable income growth outpaced spending, pushing the personal saving rate down slightly to 2.7 percent from 2.8 percent.