Inflation remained stubbornly high last month, but it hasn’t stopped Americans from spending.
The Personal Consumption Expenditures price index — a closely watched inflation gauge favored by the Federal Reserve — accelerated to 2.7% for the year ended in March, according to data released Friday by the Commerce Department.
That rate was above economists’ expectations for a 2.6% gain and landed above February’s reading of 2.5%.
Prices for services — specifically housing, health care and transportation — are applying upward pressure to overall inflation, Commerce Department data shows.
“This wasn’t the data the doctor ordered for Fed officials looking for confidence that inflation was back on a downward path,” wrote Christopher Rupkey, chief economist at FwdBonds, in a note issued Friday.
While many economists prefer to measure the nation’s inflation levels using the monthly Consumer Price Index, the Fed bases its 2% inflation target on the overall PCE index.
On a monthly basis, prices rose 0.3%, unchanged from the pace seen in February.
When stripping out energy and food prices (categories that tend to be quite volatile), the “core” PCE index held steady at 2.8%, staying at the lowest rate in three years.
Consumer spending remained strong, jumping 0.8% and equaling the blistering pace seen a month before. Economists were expecting consumers to pull back some and had forecasted an increase of 0.5%, according to FactSet estimates.
Taking inflation out of the equation, the economy-powering spending was still up 0.5%, according to the report. Inflation-adjusted disposable personal income grew 0.2%.
However, savings as a percentage of disposable income dipped to 3.2%.
This story is developing and will be updated.
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