Consumer prices rose at a slightly faster rate last month than they did in the month before, data from the Commerce Department showed Friday.
The personal consumption expenditures price index climbed 0.2 percent in July compared with June, an acceleration from the 0.1 percent increase in June from May. The acceleration was in line with what economists had expected.
Over the past year, the personal consumption expenditures (PCE) price index rose 2.5 percent, matching the June year-over-year increase.
The Federal Reserve uses the PCE price index for its official two percent target and in its publicly released projections, although officials say they also watch other inflation measures closely. While the year-over-year figure is still a half a point higher than the target, on an annualized basis—meaning, if the current inflation rate continued for 12 months—PCE inflation has been running slightly below the Fed’s target for three straight months. The three-month annualized rate is now 0.9 percent.
Core PCE prices, a measure that excludes food and energy, rose by 0.2 percent, matching the prior months’ reading. It is up 2.7 percent compared with a year ago.
Goods prices were flat for the month following two months of falling prices. Within goods, durables prices fell 0.3 percent after being flat in June and declining in May. Nondurable prices rose by a mild 0.1 percent after two months of declines.
Services prices have risen 0.2 percent for the past three months.
The report is likely to support the argument that the Fed can afford to begin cutting rates in September.
Incomes climbed 0.3 percent for the month. Real disposable income, which subtracts taxes and adjusts for inflation, rose by just 0.1 percent. Spending rose by 0.5 percent before adjusting for inflation and 0.4 percent after the adjustment.
Wages and salaries rose by 0.3 percent before adjusting for inflation. Wages declined in the manufacturing sector.
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