US PCE Inflation Rises in February; Consumer Spending Remains Strong
The U.S. personal consumption expenditures price index rose 0.4% in February. Core PCE, which excludes food and energy, also increased 0.4% that month.
Inflation readings
On a 12-month basis, headline PCE inflation stood at 2.8% through February. Core PCE inflation moved to 3.0% year over year.
The February headline rise matched economists’ forecasts. January’s 0.3% monthly gain was left unchanged.
Monthly and annual figures
| Measure | Reading |
|---|---|
| Headline PCE (month) | +0.4% |
| Core PCE (month) | +0.4% |
| Headline PCE (12-month) | +2.8% |
| Core PCE (12-month) | +3.0% |
Drivers and data context
The Commerce Department’s BEA is still catching up on delayed releases. Those delays followed last year’s government shutdown.
Inflation had been elevated even before the conflict in the Middle East. Economists point to import duties as a preexisting driver.
Effects of the Middle East conflict
The conflict that began at the end of February pushed global oil prices higher. The national average gasoline price rose above $4 per gallon.
Shipping disruptions hit fertilizer and other goods. That is expected to add upward pressure on food prices.
Political developments included a two-week ceasefire announcement tied to reopening the Strait of Hormuz. That announcement came from President Donald Trump.
Monetary policy outlook
The Federal Reserve left its target overnight rate at 3.50% to 3.75%. Minutes from the March policy meeting showed rising concern about inflation.
Fed participants warned that a prolonged Middle East conflict could keep energy costs high. They noted those costs may pass through to core inflation.
Economists say monthly PCE inflation needs to average about 0.2% for a sustained period to return to the Fed’s 2% goal. The chances of a rate cut this year have dwindled.
Consumer spending and market impacts
Consumer spending rose 0.5% in February. That followed a 0.3% gain in January.
Spending accounts for more than two-thirds of U.S. economic activity. Higher gasoline prices could shift household budgets across categories.
Large tax refunds may help lower-income households absorb costs. But stock market losses in March could curb higher-income spending.
- Estimated stock market loss in March: about $3.2 trillion.
- Economists’ February forecast for PCE month gain: 0.4%.
- BEA reporting delays due to prior shutdown.
Filmogaz.com reporting based on government releases and market signals. US PCE inflation rose in February, and consumer spending remained robust amid price pressures.
