US Q2 core PCE price index +3.6%

A broader measure of the price pressures facing American households rose more than expected in July, complicating the Federal Reserve's interest rate decision next month. The Personal Consumption Expenditures (PCE) price index, rose by 3.7% year-over-year in July, against economist forecasts of 3.6%, the Bureau of Economic Analysis said Wednesday. On a monthly basis, the PCE edged up by 0.2%, accelerating from June's 0.1% contraction and above estimates of 0.1%. The annual core PCE rate — which excludes volatile items such as energy and food — came in at 3.3%, unchanged from both the previous and expected 3.3%. Core PCE rose 0.2% on the month, matching expectations but accelerating from the 0.1% in June. In a separate report, the BEA said U.S. gross domestic product rose at a 1.5% annualized rate in the second quarter, matching forecasts. The inflation figures inside that report ran hotter than expected: the PCE price index for the quarter came in at 5.3%, against a 5.1% consensus, and the core measure at 3.6%, against 3.4%. Corporate profits rose 8.2% from the first quarter. Where Americans Spent, And Where They Pulled Back Personal income rose $115.1 billion, or 0.4% on the month, double the 0.2% economists expected and twice June's pace. Disposable personal income — what households have left after taxes — rose 0.5%. Adjusted for inflation, it still rose 0.4%. Personal spending was up 0.2%, rising to $36.3 billion in July, but the composition was lopsided. Spending on services climbed $86.2 billion, led by financial services and insurance at $24.3 billion, health care at $23.2 billion, and housing and utilities at $16.4 billion. Those three lines alone account for most of the month's gain. Spending on goods fell $49.9 billion, nearly wiping it out. Gasoline and other energy goods dropped $14.0 billion, the single largest decline of any category, followed by recreational goods and vehicles at $13.6 billion and motor vehicles and parts at $9.4 billion. Clothing, food and beverages, and household furnishings all fell too. Americans bought fewer things and paid more for services. Yields And Dollar Up, Stocks And Gold Down Markets moved against risk in the fifteen minutes after the release, though the moves were small. The yield on the two-year Treasury note, the maturity most sensitive to expectations for the Fed's policy rate, rose to 4.21%. The U.S. Dollar Index edged up to 98.74, up 0.1%. Equity index futures slipped across the board, with contracts on the Nasdaq 100 down 0.14%, the Russell 2000 down 0.11%, the S&P 500 down 0.07% and the Dow Jones Industrial Average down 0.04%, as of 8:45 a.m. ET. Gold — tracked by the SPDR Gold Shares (NYSE: GLD ) — eased to $4,622.97 an ounce. West Texas Intermediate crude fell 0.35% to $80.25 a barrel. A hotter headline number and a firmer two-year yield point the same way: the market nudged its odds of a September rate increase higher, not lower. Photo: Shutterstock