US April PCE Rises 3.8% as Energy Costs Keep Inflation Elevated
Summary
- The US said its April PCE price index rose 3.8%% from a year earlier, underscoring persistent inflation pressure.
- With the Fed using the core PCE price index as its benchmark for interest-rate decisions, rate cuts may be difficult in the near term.
- The second estimate of US first-quarter GDP growth was revised down to 1.6%%, confirming slower growth.
Forecast Trend Report by Period
Q1 Growth Revised Down to 1.6% From 2%
Surging energy prices tied to the prolonged war between the US and Iran are adding to inflation pressure in the United States. That could make it harder for the Federal Reserve to start cutting interest rates anytime soon.
The US Commerce Department said May 28 that the personal consumption expenditures price index rose 3.8% in April from a year earlier, matching economists’ estimates compiled by Dow Jones. The index increased 0.4% from the previous month. Goods prices rose 0.7% in April, driven by a 5.5% jump in gasoline prices.
Core PCE, which excludes volatile food and energy prices, climbed 3.3% from a year earlier. That matched the Dow Jones estimate and marked the highest reading since October 2023.
The PCE price index measures prices paid by US residents for goods and services. The Fed uses core PCE, rather than the better-known consumer price index, as its benchmark when setting interest rates. Fed Governor Lisa Cook said the previous day that if inflation remains above 2% for a fifth straight year, price pressures could affect the labor market. She added that policymakers are prepared to raise rates if inflation does not slow as expected. Bloomberg News reported that the latest data could bolster views inside the Fed that officials should avoid signaling rate cuts to markets.
Still, the monthly increase in core PCE was 0.2%, slightly below the market forecast of 0.5%. CNBC said that could indicate last month’s sharp price gains may be starting to ease.
The US also released its second estimate for first-quarter gross domestic product the same day. GDP growth was revised down to 1.6%, slightly below the Dow Jones forecast of 2%. The US publishes growth data in three rounds: an advance estimate, a second estimate and a final reading. The initial first-quarter figure was 2%. The Commerce Department said the revision reflected lower estimates for consumer spending and investment.
Han Myung-hyun, Hankyung.com reporter, wise@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
