Inflation Remains Low in July As Investors Weigh Impact Of Fed Policy

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U.S. stocks are trading flat on Friday morning following 2 strong days of rallying after an important Fed official said a couple of days ago the case for a September rate hike is less compelling and stronger than expected 2nd quarter GDP results yesterday suggests the U.S. economy is growing at a strong pace.

Today the Bureau of Economic Analysis reported that inflation as measured by the PCE price index rose just 0.1 percent in July compared with an increase of 0.2 percent in June, and below a forecast of 0.2 percent from briefing.com.

The Fed uses Core PCE data for its primary inflation gauge.

Excluding food and energy, the PCE price index increased 0.1 percent in July, the same increase as in June, and a 0.3 percent increase  from July a year ago.

Excluding food and energy, the July PCE price index, increased 1.2 percent from July a year ago which is the lowest level since March 2011, lower than 1.29 percent in June, and is below the Fed’s 2 percent inflation target.

The Bureau of Economic Analysis also reported that Personal income increased $67.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $61.5 billion, or 0.5 percent, in July.

Personal income can be an indicator of future consumer demand, but it is not always a perfect barometer.

Wages and salaries increased $35.8 billion in July, compared with an increase of $14.3 billion in June.

Personal spending increased 0.3 percent in July, below the forecast of 0.4 percent from briefing.com and matching the same increase from June.

-Johnathan Schweitzer

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