Key Inflation Measure Hits New High in 30 Years – .

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Key Inflation Measure Hits New High in 30 Years – .


Excluding food and energy prices, which tend to be volatile, the measure of inflation stood at 3.6%, where it has been since June. It remains the fastest core inflation rate since March 1991 and well above the Federal Reserve’s 2% target.

The PCE inflation indicator is one of many, and they don’t all point in the same direction: the consumer price inflation index hit a 13-year high in August, for example. But the PCE index is the Federal Reserve’s preferred measure of inflation.

The continued surge in PCE inflation has led the Fed to signal that it will begin to end its emergency economic stimulus measures, even though the US economic recovery has shown signs of slowing in recent months.

Salary increases and price increases

Although prices rose sharply, US revenues grew only at a modest pace, up 0.2% or $ 35.5 billion. Disposable income grew even less – just 0.1% or $ 18.8 billion.

These increases were in part due to higher wages as companies try to attract and retain workers as a labor shortage hangs over many companies. In government benefits, the advance payments of the child tax credit under the US bailout helped increase income. Friday’s report does not yet reflect the end of improved pandemic unemployment benefits, which ended in early September.

And yet Americans kept going out to spend their money. Consumer spending rose 0.8% or $ 130.5 billion in August, roughly evenly split between goods and services.

“Households still have a long way to go given rising jobs and wages, soaring net worth (as house prices soar) and massive surplus savings,” Sal said. BMO Senior Economist Guatieri in a note to clients. “However, rising prices are eating away at purchasing power,” he added.

Consumers remain the backbone of the US economy. If inflation got so high that people would rather save their money than spend it, the US economy would be in dire straits.

That said, the savings rate has skyrocketed during the pandemic. In August, it stood at 9.4%.

Given the continued threat of new Covid-19 infections via the Delta variant and colder months with fewer outdoor activities looming, people’s spending on services could be reduced.

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