North America Observation丨Personal consumption expenditure price index rebounds, US inflation still shows signs of deterioration
CCTV News Client News On September 30, local time, the U.S. Department of Commerce released data showing that the U.S. personal consumption expenditures (PCE) price index rose 0.3% month-on-month in August and 6.2% year-on-year, indicating that the U.S. inflation situation is still deteriorating. There is still a long way to go before prices are brought under control. Under the influence of the Fed’s continued aggressive interest rate hikes to combat inflation, problems in various areas of the US economy have also emerged.
Fed’s preferred inflation gauge accelerates
Data from the U.S. Department of Commerce showed that the U.S. personal consumption expenditures price index rose 0.3% month-on-month in August, a deterioration from the July data; the August personal consumption expenditures price index rose 6.2% year-on-year, although the increase was slightly better than the 6.4% increase in July. But it has been above 6% for eight consecutive months.
The data also showed that after excluding the volatile food and energy prices, the core personal consumption expenditure price index rose by 0.6% month-on-month in August, higher than the market expectation of 0.5%, and a sharp acceleration from the 0.1% increase in July; August The core personal consumption expenditure price index rose 4.9% year-on-year, higher than market expectations of 4.7%, and accelerated from the 4.7% increase in July.
Analysts believe that, as the most important inflation indicator of the Fed, the latest core PCE data shows that the inflation rate is still much higher than the 2% long-term target set by the Fed, indicating that inflation pressure has not been effectively alleviated for a long time, and the Fed is expected to continue to tighten Monetary policy and another aggressive rate hike of 75 basis points at the next policy meeting in November.
Vinod Agarwal, a professor at the Strom School of Business at Old Dominion University, said in an interview with a CCTV reporter: “This is exactly the data the Fed is looking at. They don’t look at the consumer price index (CPI). ), they’re looking at personal consumption expenditures (PCE). But it doesn’t really matter, the fact is that inflation is much higher than they’d like to see, and they’re seeing that last month it wasn’t as high as Falling back as expected. They see the issue of runaway inflation lingering because it’s not close to 2%. So, they’re going to continue to have very restrictive monetary policy until they see evidence that inflation has fallen to 2% %.”
Stocks and housing are already feeling the pinch
Against the backdrop of the Federal Reserve’s continued interest rate hikes to combat inflation, various areas of the U.S. economy, including the stock market and the real estate market, have felt the pressure to raise interest rates.
The “Wall Street Journal” recently analyzed that the Fed’s interest rate hike will eventually lead to a slowdown in economic growth and may drag down corporate profits. In addition, the market’s valuation level has been limited, which means that the US stock market is facing dual pressure. Since the beginning of this year, major U.S. stock indexes have continued to fall sharply, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all posting their worst performances in the first nine months since 2002 on September 30. Among them, the Dow Jones index has fallen by 21% this year, the S&P 500 index has fallen by 25%, and the Nasdaq composite index has fallen by 32%.
Meanwhile, the Federal Home Loan Mortgage Corporation’s (Freddie Mac) latest survey of lenders shows that the average rate on a 30-year fixed-rate mortgage in the U.S. has climbed to 6.7%, the highest level since July 2007. , a wake-up call for homebuyers. Just a year ago, the interest rate was only 3.01%. Many analysts pointed out that in the context of the Federal Reserve’s continued interest rate hikes to control inflation, the US residential mortgage interest rate rose to the highest level in more than 15 years, which undoubtedly cooled the already low temperature. The U.S. housing market added pressure.
Rüdiger Bachmann, a professor of economics at the University of Notre Dame, said in an interview with a CCTV reporter: “One of the main reasons for negative economic growth is actually a decline in residential investment. Considering the high interest rates in the United States, this Not surprisingly, that’s exactly what we’re seeing. Residential investment in the U.S. is falling as mortgage rates rise in response to rising federal funds rates. That’s what economics textbooks can predict. “
From the perspective of the overall economic performance, the final revised data released by the US Department of Commerce on September 29 showed that the US gross domestic product (GDP) in the second quarter of 2022 fell by 0.6% at an annual rate, which was the same as the revised data previously released. That means the U.S. economy has slumped for two consecutive quarters, slipping into a technical recession. Up to now, a number of financial institutions have lowered their forecasts for the future growth prospects of the U.S. economy and expressed doubts about whether the U.S. economy can achieve a soft landing. (CCTV reporter Gu Xiang Xu Dezhi)