March 28 (UPI) — The Federal Reserve’s preferred inflation gauge rose by more than expected in February, according to U.S. Bureau of Economic Analysis shared Friday.
The monthly Personal Income and Outlays report showed that personal consumption expenditures, or PCE, increased by $87.8 billion, or .4%, while personal income increased by $194.7 billion, at .8%, and disposable personal income, or personal income minus personal current taxes, went up $191 billion, or .9%.
The agency pointed out that the uptick in current-dollar personal income in February mostly reflected increases in current personal transfer receipts and compensation. Personal outlays, which combines personal consumption expenditures with personal interest payments and personal current transfer payments also increased to $118.4.
Personal saving was $1.02 trillion and the personal saving rate, or personal saving as a percentage of disposable personal income, was 4.6 percent.
However, the Commerce Department announced Friday that the Fed’s key inflation measure expanded more than expected in February, as the growth in personal consumption expenditures put the 12-month inflation rate at 2.8%. Economists surveyed by Dow Jones had been expecting numbers closer to 0.3% for PCE and only 2.7% for the inflation rate.
The February increase in current-dollar PCE reflects increases of $56.3 billion in spending for goods and $31.5 billion in spending for services. Goods prices went up to 0.2%, led by recreational goods and vehicles, which increased 0.5%. Gasoline helped blunt some of the increase, as it fell by 0.8%. Services prices went up 0.4%.
The inflation of PCE is a concern of Federal Reserve officials, who view it as a broad measure that adjusts as consumer behavior changes but places less focus on housing than the Labor Department’s consumer price index. Shelter costs have been one of the tougher elements of inflation, as it rose .3% in the PCE measure.
“It looks like a ‘wait-and-see’ Fed still has more waiting to do,” as chief economic strategist at Morgan Stanley Wealth Management Ellen Zentner told CNBC, “Today’s higher-than-expected inflation reading wasn’t exceptionally hot, but it isn’t going to speed up the Fed’s timeline for cutting interest rates, especially given the uncertainty surrounding tariffs.”
The Federal Reserve’s preferred inflation gauge had risen in line with expectations in January, when PCEs increased .3%, Outside of food and energy, the core PCE rate rose .3% for January and 2.6% annually.
