US Inflation Cooled While Consumer Spending Picked Up in June

Key US inflation measures continued to cool and consumer spending picked up in June, adding to momentum in the economy ahead of the third quarter.

The personal consumption expenditures price index rose 0.2% last month from May, Commerce Department data showed Friday. From a year ago, the measure that the Federal Reserve uses to track its 2% inflation goal, increased 3% — the slowest pace in more than two years.

The so-called core PCE price index, which economists tend to see as a better gauge of inflation as it strips out the volatile food and energy components, also rose 0.2% from the prior month and was up 4.1% from June 2022.

Consumer spending, adjusted for inflation, increased 0.4% in June — the most since January.

Metric Actual Est.
PCE price index (MoM) +0.2% +0.2%
Core PCE price index (MoM) +0.2% +0.2%
PCE price index (YoY) +3% +3%
Core PCE price index (YoY) +4.1% +4.2%
Real consumer spending (MoM) +0.4% +0.3%

Meanwhile, a quarterly measure of employment costs — also closely watched by the Fed — rose in the second quarter at the slowest pace in two years, according to separate government data out Friday.

While the annual inflation rate remains above the Fed’s target, the sharp slowdown in price and wage growth over the past year adds to hopes that the central bank can tame inflation without causing an economic downturn.