Core inflation slowed down in August, the Federal Reserve’s preferred gauge showed Friday, suggesting President Trump’s tariffs are not creating significant price pressures for American households.
The personal-consumption-expenditures price index rose by 0.3 percent compared with a month earlier, the Commerce Department said, a notch up from July’s 0.2 percent climb. Over the 12 months ending in August, the index climbed 2.7 percent, up from July’s 2.6 percent increase.
Core prices, a measure that excludes the volatile food and energy prices, rose 0.2 percent, a slowdown from the 0.3 percent rise in the prior month. Compared with 12 months ago, the core index is up 2.9 percent, matching the year-over-year inflation figure for July.
Prices of durable goods, those most likely to be affected by tariffs, fell for the second straight month, declining 0.1 percent. Real spending on durable goods—that is, spending after adjusting for inflation—rose 0.9 percent after climbing 1.8 percent in July, an indication that consumers have not been put off of buying longer-lasting goods by a softening labor market or concerns over tariffs.
Over the past seven months—or since the start of Trump’s presidency—durable goods prices are up 0.4 percent. That amounts to an annualized rate of inflation of 0.6 percent. The overall inflation index is up at an annualized rate of 2.6 percent over that period, matching the year-over-year rate.
Prices of nondurable goods rose 0.2 percent, reversing the 0.1 percent decline in the prior month. Real spending on durable goods was up 0.5 percent.
Overall, consumer spending rose 0.6 percent, the Commerce Department said. After adjusting for inflation, spending rose 0.3 percent.
Rising wages and incomes financed the spending increases. Personal income rose 0.4 percent, or 0.1 percent after inflation. Wages rose 0.3 percent, keeping pace with inflation. After adjusting for inflation and taxes, real disposable income ticked up 0.1 percent, the second consecutive monthly rise.
The services sector was once again the source of inflationary pressure in August. Prices rose 0.3 percent, matching the increase in July. Spending on services rose 0.5 percent, which means inflation adjusted spending climbed 0.2 percent. Food prices climbed sharply in the month, rising 0.5 percent after declining in July.
Energy-related goods and services prices rose 0.8 percent.
A measure called “market-based PCE”—which excludes prices that the Commerce Department estimates using its economic models, counting only prices directly observable—rose 0.2 percent. Excluding food and energy, core market-based PCE also rose 0.2 percent.
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