Friday, the Bureau of Economic Analysis’ PCE release showed the Fed’s preferred inflation gauge rose 2.7% year‑over‑year in August, with the core PCE (ex food and energy) at 2.9%. Month‑to‑month the PCE index increased about 0.26% and core PCE rose roughly 0.23%, both near consensus.
Thursday, the BEA also finalized a big upward revision to spring growth: second‑quarter real GDP was revised to +3.8% annualized, driven largely by stronger consumer spending. The BEA’s state release showed real GDP rose in 48 states in Q2, underlining broad activity rather than a narrow bounce.
Why it matters: sticky core inflation that’s still above the Fed’s 2% target complicates a simple “cut now” script, while stronger GDP weakens the case for rapid easing. Markets and policymakers will weigh whether the headline signals reflect persistent demand or noisy trade/inventory swings.
What to watch in the data flow: revisions and the composition of spending. If future prints show services inflation and wages decelerating, the Fed can cut with more confidence; if consumer spending and PCE services stay firm, policymakers may move more cautiously.
