WASHINGTON – Personal income rose 0.2% in August, as expected, while an as-expected 0.2% gain in the core PCE price index lifted the year/year rate for core inflation growth to 1.7% after holding at 1.6% for five straight months, data released by the Commerce Department Friday morning showed.
Even with the small uptick, the year/year rate of growth for August core PCE prices suggests little movement in underlying rate of inflation and is still below the 2.0% rate cited by the Federal Reserve.
Nominal PCE was flat in August, weaker than the 0.1% gain expected. Durable goods spending fell by 1.3%, likely due to weakness in auto sales, while nondurable goods spending fell 0.2%. Services spending provided some offset, rising 0.3%.
For income, there were gains reported in most of the major categories, with particularly large increase in current transfer receipts and income on assets. Wages and salaries rose only 0.1% in the month after larger gains in the previous four months.
Disposable personal income rose 0.2% in the month, while real disposable income rose 0.1%.
The saving rate rose to 5.7% in August from 5.7% in July.
The overall price index was up 0.1% in August following a flat reading in July. The modest gain lifted the year/year pace to 1.0% from 0.8% in July.
Real PCE was down 0.1% in August following a 0.3% increase in July. After inflation adjustment, durable goods PCE was down 1.3% and nondurable goods PCE was down 0.3%, partially offset by a 0.1% gain in services PCE.
Through two months, real PCE was up 2.4% at an annual rate from the second quarter average, but would be up 2.9% after an MNI adjustment to compensate for lacking the last month of the quarter. Still, this is a much slower pace than 4.3% gain reported for second quarter GDP. As a result, PCE should be a small contributor to GDP growth in the third quarter.
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