The PCE price index jumps mom by most in 13 months on non -housing services. Recreational services blow. Sustainable goods continue 6 months of deflation.
By Wolf Richter for Wolf Street.
The measurement of inflation published today – the PCE price index favored by the Fed as a male for its inflation objective – caused another surprise.
While petrol prices fell in February from January and food prices were stable from month to month after a substantial increase in previous months, basic services leaps, fired by housing without housing, in particular by consumers during six months to want To buy.
The prices of sustainable goods stopped lowering last year, then began to increase, initially driven by a significant increase in the price of used vehicles, after their historic diving. I have stopped for months here that durable goods no longer push the overall readings of inflation.
These are retail prices of sustainable products that consumers purchased in February, long before any price reaches retail prices. It is pure and simple inflation that has been crawling for months, bouncing between various categories of non-housing services and certain goods.
The basic PCE price indexwhich excludes food and energy elements, accelerated at + 0.37% ( + 4.5% annualized) in February from January, the worst increase of 13 months, and January was revised above, according to data from the Bureau of Economic analyzed today (blue in the table below).
The basic PCE price index of 3 months accelerated at + 3.6% annualized, the worst increase since March 2024.
The 6 -month PCE price index (RED) accelerated at + 3.1% annualized, the highest increase since June 2024.
The overall price of PCE prices increased by 0.33% (+ 4.0% annualized), just a hair lower than the increase in the revised increase in January (initially reported to 4.0% and revised today at 4.1%). Both were the worst increases from one month to the next since March 2024
The PCE price index at 3 months accelerated at + 3.9% in February, the worst increase from one month to month since March 2024 and January was revised above ( + 3.0% against 2.9%).
The low point of the three -month index was in July (+ 1.1% annualized) and it has been accelerated since.
The 6 -month PCE price index accelerated at + 3.1%, the worst increase since September 2023.
The PCE price index of basic serviceswhich excludes the energy services, accelerated in February at + 0.35% ( + 3.6% annualized), drawn by non-housing services, in particular the current thrust on recreational services, and despite the deceleration of housing services (rent).
The 6 -month PCE price index of the basic services accelerated for the fifth consecutive month at 3.7% annualized, the worst increase since June 2024. The low point was in September 2024.
The Fed started low -point rate drops. With hindsight, we can see that inflation was walking a low point during the period from June to September 2024. With the August data, I started to point to this issue.
Used vehicles have started to increase, non -housing services have started to increase, food prices have started to accelerate. By the October IPC, it has become strong and clear: “The Global IPC accelerates for the 4th month, the” basic “ICC for the 3rd month during the re-evolution of the price of used vehicles and the increase in the costs of the owners”, I declared in the title.
But in September, the Fed embarked on its rate drops with a reduced monster just after inflation was fully and began to reset. The Fed was erected by the labor market data – which turned out to have been a false alarm – when it thought that inflation had been licked, which was not.
Sustainable goods prices have emerged from deflation. The prices index of the six -month PCE for sustainable products began to go higher in September of last year, when it was still in deflation (negative), and it became less negative, motivated by positive readings from month to month in September, October, January and February. A large driver was used vehicles, the prices of which have resurfaced.
Housing inflation (rent) is no longer the culprit. The PCE price index for housing, which is part of the basic services, deceived + 0.28% ( + 3.4% annualized).
The six-month index has decelerated 3.8% annualized, the lowest since September 2021. This housing inflation measure is now back in the pre-countryic range.
Inflation blows in recreational services. This is a large category of services that consumers want to buy, in particular: cable and satellite services, high speed, amusement parks, camping, concerts, spectator sports, films, theaters, games of games, video streaming, veterinary services, package visits, members, clubs, participating sports centers and clubs, maintenance and repair of recreational and sports equipment, etc.
The increases from one month to another started, you guessed it, in September 2024, then in October which became hot, and in January and February, burned by red, the graph (literally), with 14.5% and 12.6% of increases from month to month.
This pushed the increase of six months to + 7.0%, the third worst of all this inflation cycle, behind January and February 2023. The low point had been, you guessed it, in August 2024 to 1.0%.
Remaining categories of servicesOnly the transport services, which include plane tickets, reserved a decrease of one month in months in February:
- Transport services (-2.5% annualized)
All other services have reserved significant increases from month to month:
- Health services (+ 4.1% annualized)
- Insurance (+ 3.9% annualized)
- Food services index (+ 4.4% annualized)
- Non -energy utilities (+ 12.8% annualized)
- Financial services (+ 6.1% annualized)
- Other services (+ 7.7% annualized).
Over one year on the other:
- Global price of PCE prices (red): + 2.5%, as in January. The objective of the Fed is 2.0%.
- PCE price index (blue): + 2.8%, up compared to January ( + 2.7%)
- PCE price index (Gold): + 3.6%, up compared to January ( + 3.4%)
- Price index of sustainable products (green): -0.9%, less negative than in January (-1.2%)
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