In November, inflation nudged slightly away from the Federal Reserve’s target, yet remained within anticipated levels, based on the central bank’s favored measure released on Thursday.
The personal consumption expenditures (PCE) price index, which the Commerce Department provides and the central bank relies on for forecasting, indicated an inflation rate of 2.8% for the month, matching the Dow Jones forecast for both headline and core measurements.
The Bureau of Economic Analysis also mentioned that the rate for October stood at 2.7% for both headline and core, with core excluding the oft-volatile prices of food and energy.
The monthly statistics revealed a 0.2% increase for both October and November. The BEA published the figures for these two months together due to the government shutdown that resulted in the pause of data collection and reporting by official agencies.
Alongside the inflation data, the report indicated that personal income rose by 0.1% in October and 0.3% in November, the latter falling short of the forecast by 0.1 percentage point. Moreover, personal consumption expenditures, serving as an indicator of consumer spending, increased by 0.5% in both months, aligning with the forecast for November.
The personal savings rate increased to 3.5% in November, a decrease of 0.2 percentage point from the previous month.
Price data for November demonstrated increases of 0.2% in both goods and services. Food prices remained unchanged while energy costs surged by 1.9%, following a decline of 0.7% in October.
This report coincides with the BEA’s announcement that gross domestic product (GDP) grew by 4.4% in the third quarter, as per the second and final estimate. Additionally, the Labor Department noted that jobless claims are near their lowest levels in two years.
Collectively, these statistics suggest an economy that is still expanding, with consumer spending outpacing inflation, even amid a somewhat weakening labor market.
“Consumers continue to fuel the U.S. economy, with today’s data indicating another robust increase in spending. This durability persists despite last year’s labor market slowdown and sustained high inflation, both of which have impacted real incomes,” remarked James McCann, a senior economist for investment strategy at Edward Jones. “Today’s information should provide reassurance to the Fed that the economy is on a strong footing, despite a softer labor market.”
Market participants anticipate that the Federal Reserve will maintain its current stance at the upcoming policy meeting following three back-to-back interest rate cuts in 2025. Futures traders predict a maximum of two rate cuts this year as policymakers evaluate the effects of last year’s easing, along with ongoing inflation pressures and an unpredictable geopolitical environment.
