US inflation cools in July, but core prices rise as spending stalls

Washington, Aug 27 (SocialNews.XYZ) US consumer inflation eased sharply in July, but household spending was almost flat and economic growth slowed during the second quarter, according to a congressional report.

The Joint Economic Committee’s monthly expenditure update, released on Wednesday (local time), showed that the headline personal consumption expenditures price index rose 0.16 per cent between June and July. That was below the 0.40 per cent monthly increase recorded in June.

The underlying measure, however, moved in the opposite direction.

Core PCE inflation, which excludes the more volatile food and energy categories, increased by 0.25 per cent in July. It had risen by 0.13 per cent in June.

The figures present a mixed picture for the US economy. Overall monthly inflation moderated, but underlying price pressures accelerated and remained above the Federal Reserve’s longer-term goal.

Over the 12 months ending in July, headline PCE inflation stood at 3.70 per cent. That was slightly higher than the 3.67 per cent annual rate registered in June and remained well above the Federal Reserve’s 2 per cent target.

Annual core PCE inflation increased to 3.34 per cent from 3.29 per cent a month earlier, according to the committee.

The PCE index is closely watched in Washington because it is the inflation measure preferred by the Federal Reserve. Unlike the consumer price index, it reflects changes in household purchasing patterns as people respond to rising or falling prices.

Household expenditure showed little momentum during the month. Inflation-adjusted personal consumption expenditure increased by just 0.01 per cent, or $1.26 billion, between June and July.

The near-flat reading concealed a sharp difference between services and goods.

Real spending on services rose by 0.29 per cent, or $32.04 billion. Spending on goods fell by 0.61 per cent, or $35.48 billion.

The decline in goods expenditure was larger than the rise in services in dollar terms. The broader consumption measure nevertheless recorded a marginal increase because of the way different categories are weighted in the index.

Americans also saved a slightly larger share of their income. The nominal personal savings rate increased by 0.4 percentage points to 3 per cent.

Personal income rose by 0.43 per cent from the previous month, an increase of $115.11 billion.

Real disposable personal income per person increased by 0.35 per cent. The committee said this meant after-tax income grew faster than prices during July.

The report also showed that the US economy continued to expand during the second quarter, although at a slower pace.

Real gross domestic product grew by 1.48 per cent from the first to the second quarter of 2026. Growth had stood at 2.09 per cent during the first quarter.

Current-dollar GDP increased by 8.02 per cent, or $620.345 billion, to $32.486 trillion, according to the committee’s second estimate update for the April-to-June period.

Source: IANS