Key Inflation Gauge Pops Again, This Time Hitting Highest Level In Nearly 40 Years – Entrepreneur
The Federal Reserve’s preferred inflation gauge, the so-called PCE price index, vaulted again in November, this time hitting its highest level in nearly four decades and delivering a fresh data point reinforcing the persistence of inflationary pressures.
The Commerce Department reported on Dec. 23 that the headline Personal Consumption Expenditures (PCE) price index rose by 5.7 percent in the 12 months through November. That’s a higher pace of inflation than the 5.1 percent logged in October, which was the highest since 1990, and nearly three times higher than the Fed’s inflation target of 2 percent. It’s also the highest level since July 1982, when PCE inflation hit 5.8 percent.
Meanwhile, the so-called core PCE price index, which excludes the volatile categories of food and energy and is the inflation gauge the Fed relies on most heavily when calibrating monetary policy, rose in the year through November at 4.7 percent. That’s well above October’s over-the-year rate of 4.2 percent and slightly higher than forecasts of 4.5 percent. It’s also the fastest pace since 1989.
Some economists warn that underlying inflationary pressures, which the core PCE measure reflects, could intensify further. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note that he expects even more upside for core PCE inflation, predicting the gauge has “further to rise before peaking in February.”
The new figures follow a number of other data releases pointing to the persistence of inflation, including the third-quarter PCE inflation coming in at 5.3 percent and the consumer price index (CPI) measure rising in the year through November at 6.8 percent, with the latter gauge surging to its highest level in nearly 40 years.
Commenting on the consumer price hikes, Bankrate Chief Financial Analyst Greg McBride told The Epoch Times in an emailed statement that inflation rising faster than wages was dragging down consumer confidence. He predicted that “it is only a matter of time before it impacts consumer spending in a material way.” Consumer spending is a key driver of the U.S. economy, accounting for around two-thirds of output.
Richard Curtin, director of the University of Michigan’s closely watched Consumer Sentiment Index, a confidence measure closely watched by analysts and investors, said that worries about inflation recently outpaced concerns about the jobs situation.
“When directly asked whether inflation or unemployment was the more serious problem facing the nation, 76 percent selected inflation while just 21 percent selected unemployment,” Curtin said in a statement that accompanied the latest Michigan University survey reading for early December, which showed a slight uptick in consumer confidence compared to November’s decade low.
A separate sentiment gauge issued by the Conference Board showed consumer confidence rising slightly in December …….