The U.S. Bureau of Economic Analysis released its Personal Consumption Expenditure (PCE) Index, a key measure of inflation, showing just a fractional a 0.3% increase last month as President Donald Trump begins to tackle the economy.
Since inflation typically rises over time, economists focus not on whether it increased, but on the pace of the increase. The latest figures aligned with expert expectations, according to The Center Square.
The index increased by 2.5% compared to the same time last year, or 2.6% when excluding food and energy costs. While economists had anticipated a steeper decline in inflation by now, the current figures remain significantly lower than the rapid inflation rates experienced during the Biden administration.
“Nothing in these data change the narrative much. Inflation appears to be gently slowing and that could give optimists hope that it will continue to do so,” Harvard economic professor and former advisor to President Barack Obama, Jason Furman wrote on X.. “But core inflation is also stuck above 2.5% — much higher than the 2.1% that forecasters had expected just a year ago.”
Personal income increased by 0.9% in January, while personal spending decreased and personal savings rose.
“This is the ultimate double-edged sword report: PCE came in line with expectations and is relatively good news, but Personal Spending came in much lower than expected and is cause for concern, because of the steep drop in consumption,” Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management in Charlotte, N.C., noted in a statement, per the outlet.
“Given how sanguine investors are about the economy – assuming GDP will stay above 2% for the foreseeable future – and how concerned they are about inflation remaining sticky, we are at risk of an out-of-consensus situation, where we may be experiencing a deteriorating economy with inflation that will be less of an issue than is currently feared,” he noted further.
