PCE Report: Fed's Preferred Inflation Gauge Rises 3.7% In June, GDP Grows At A Slower-Than-Expected Pace In Q2

Annual rates of PCE and core PCE were in line with analyst forecasts, but the second-quarter GDP missed Wall Street expectations.

• Consumer spending, adjusted for inflation, increased 0.4% in June after rising 0.3% in May, while personal income decreased 0.2% during the month.
• In absolute terms, personal income increased about $54.9 billion in June, while disposable personal income rose $48.3 billion.
• Personal consumption expenditures increased $65.2 billion, while personal outlays increased $70 billion during the month.

The Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve’s preferred gauge of inflation, advanced 3.7% in June on an annualized basis.

The Commerce Department data showed that core PCE, which excludes food and energy, rose 3.3% on an annualized basis in June, up 0.1% on a monthly basis.

Both PCE and core PCE were in line with analyst forecasts, according to a Dow Jones estimate as cited by MarketWatch.

Particulars	Actual	Forecast
PCE price index (MoM)	-0.1%	-0.1%
PCE price index (YoY)	+3.7%	+3.7%
Core PCE price index (MoM)	+0.1%	+0.2%
Core PCE price index (YoY)	+3.3%	+3.3%

Source: Bureau of Economic Analysis, U.S. Department of Commerce

Q2 GDP Misses Expectations

Data from the Bureau of Economic Analysis showed that the U.S. economy grew at an annualized rate of 1.5% in the second quarter (Q2), falling short of Wall Street’s expectations of 1.8% growth.

The BEA report stated that the deceleration in GDP during Q2 was caused by a downturn in government spending, in addition to a pullback in investments and exports during April and June.

Consumer Spending Inches Up

Consumer spending, adjusted for inflation, increased 0.4% in June after rising 0.3% in May, while personal income decreased 0.2% during the month.

In absolute terms, personal income increased about $54.9 billion in June, while disposable personal income rose $48.3 billion. Personal consumption expenditures increased $65.2 billion, while personal outlays increased $70 billion during the month.

Personal savings stood at $646.1 billion in June, while the personal saving rate was 2.7%.

Increase In Jobless Claims Lower Than Expected

Meanwhile, jobless claims rose in the week ending July 25 to 197,000 from 191,000 in the prior week, but came in lower than a Dow Jones estimate of 200,000, as cited by MarketWatch.

The four-week moving average for jobless claims, which smooths weekly volatility, fell by 5,000 to 202,750.

Continuing claims, which refer to the number of people claiming unemployment benefits beyond the first week, hovered in the 1.78 million range for the week ending July 18, decreasing by 7,000 over the previous week’s revised level.

Meanwhile, U.S. equities gained in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, rose 0.76%; the Invesco QQQ Trust ETF (QQQ) soared 1.85%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.57%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bearish’ territory.

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