New government data showed prices notching a monthly decline for the first time since April 2020, adding to an improving picture on inflation as the new year looms.
The Personal Consumption Expenditures Price Index (PCE), one of two major readings on inflation, fell by 0.1% between October and November, the Bureau of Economic Analysis said Friday — the first monthly decline in more than 3 1/2 years.
Combined with other recent data showing disposable personal income and consumer sentiment rising, the United States’ economy appears to be heading into 2024 on strong footing even as it cools down. That has boosted expectations for a potential “soft landing” that reins in inflation without triggering mass layoffs or a recession.
Lower gas prices and cheaper goods contributed to the modest decline in Friday’s PCE numbers. Because prices have largely continued to rise this year, they still clocked in 2.6% higher than in November 2022. But that’s an improvement from the PCE’s 5.5% yearly inflation rate back in January and 7.1% rate in June 2022.
Earlier this month, the Consumer Price Index, the other major inflation measure alongside the PCE index, showed annual inflation slowing to 3.1% in November, easing a bit from a 3.2% rate the month before.
“[T]he latest data confirm that the disinflation momentum is gathering pace,” EY senior economist Lydia Boussour said in a note, using the term for when price increases slow down — which is different from “deflation,” when prices outright drop.
As prices fell in November, American households’ capacity to spend increased, the BEA’s Friday report showed. Real disposable income, which adjusts for inflation, grew by 0.4% between October and November, after a summer of nearly no growth.
A separate report that the University of Michigan released Friday showed consumer sentiment soaring 14% in December. The jump reversed four months of declines and reflects growing optimism among U.S. spenders, whose outlays
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