Just like temperature gauges throughout the U.S., inflation heated up in June, according to data released Thursday by the Bureau of Economic Analysis (BEA).
The personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred inflation barometer — rose 0.3% month over month and 2.6% on an annual basis in June. Economists polled by FactSet had expected 0.2% monthly and 2.5% yearly growth.
Core PCE inflation, which strips out the more volatile food and energy categories, climbed 0.3% from May and 2.8% from a year ago.
BEA also upwardly revised May’s headline and core inflation readings, which now stand at respective annual marks of 2.4% and 2.8%.
The 2.6% overall inflation mark in June is even higher than predicted by Fed Chair Jerome Powell, who said during a Wednesday press conference that data suggested a 2.5% headline PCE increase on a 12-month basis. Rising inflation was one the primary reasons the Fed gave for holding interest rates steady in July, and the BEA report may validate the Fed’s inaction in the minds of some critics.
The BEA, which is part of the U.S. Commerce Department, reported that despite the increase in prices last month, consumers spent more than they did in May.
Personal consumption expenditures, which measures total spending on goods and services, rose 0.3% in June to $69.9 billion. Real PCE, which adjusts for inflation, increased by 0.1%.
Wells Fargo economists Tim Quinlan and Shannon Grein observed in an analysis that despite the uptick in consumer spending in June, it “slowed materially in the first half of the year.”
“We’ve certainly seen signs of cautious consumers so far this year,” Quinlan and Grein wrote. “Consumer optimism remains depressed, as households’ views of the jobs market have deteriorated, and they remain increasingly concerned about higher prices.”
Looking ahead, they expect “consumption to muddle along in the second half of the year,” believing that “persistent moderation in the labor market will likely continue to cause consumers to tighten their purse strings.”
