A key inflation indicator rose 3.6 percent in July from last year — its biggest year-over-year jump in 30 years — as costs continued to build in the US economy, the feds said Friday.
The Commerce Department’s core personal consumption expenditures index has risen over a 12-month period, the most since May 1991. The reading met expectations from economists surveyed by Dow Jones.
The core index, which excludes volatile food and energy costs, rose 0.3 percent from June, slightly slower than the 0.4 percent increase seen from May to June, the Commerce Department reported.
The index tracks prices across a variety of goods and services and is considered a broader measure for inflation than the Labor Department’s Consumer Price Index, which rose 5.4 percent in July from a year ago.
Including food and energy, the Commerce Department’s index jumped 4.2 percent from a year ago, up from 4 percent in June and the highest reading since 1991.
Personal income also surged 1.1 percent in July, topping expectations of a 0.3 percent increase.
But at the same time, consumer spending increased a modest 0.3 percent, less than a third of the prior month’s gain.
That suggests Americans’ appetite to spend could be easing as inflation flares and the Delta variant drives a surge in COVID-19 cases that’s prompting businesses to further delay the reopening of the economy.
As the new economic data was published, Federal Reserve officials prepared for their annual symposium, which begins Friday and will be held virtually again.
Of interest will be any signs that Fed chairman Jay Powell gives about tapering its $120 billion-a-month bond purchasing program that it started at the beginning of the pandemic.
Critics have said the program is driving the surge in prices throughout the economy, but Powell and other Fed officials have voiced the opinion that the bouts of inflation are due to temporary issues like rigid supply chains.
And last month’s CPI report did show inflation is easing in some sectors that were hit particularly hard earlier this summer, but prices continued to rise in other sectors like food and housing, too.
Fed officials consider the core PCE index to be among the best gauges for inflation, though they watch various other statistics.
The Labor Department is slated to publish August’s CPI report, which will give more insight into the costs building in the economy, in a little over two weeks.
