por admin » Vie Jun 25, 2021 7:49 am
Key inflation indicator posts biggest year-over-year gain in nearly three decades
PUBLISHED FRI, JUN 25 20218:31 AM EDTUPDATED 3 MIN AGO
Jeff Cox
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Key inflation indicator rises 3.4% in May from a year earlier, as expected
A key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May, the fastest increase since the early 1990s, the Commerce Department reported Friday.
Though the gain was the biggest in nearly 30 years, it met the Dow Jones estimate and markets reacted little to the news. Stock market futures indicated a gain of about 150 points for the Dow at the open, while government bond yields were mostly flat.
The core personal consumption expenditures price index increase reflects the rapid pace of economic expansion and resulting price pressures, and amplified how far the nation has come since the pandemic-induced shutdown of 2020.
Though the reading could add to inflation concerns, Fed officials continue to insist that they see the current situation as temporary and likely to abate as conditions return to normal.
The core index rose 0.5% for the month, which actually was below the 0.6% estimate.
Including volatile food and energy prices, the PCE index rose 3.9% for the year and 0.4% for the month.
The headline increase was the biggest since August 2008, just before the worst of the financial crisis hit and sent inflation on a path lower that would last throughout the longest economic recovery in U.S. history.
Inflation has spiked recently amid a confluence of factors. They include supply chain disruptions in which manufacturers of key products have been unable to keep up with escalating demand that has come with the economic reopening.
Soaring real estate prices also have played a factor as lumber cost have soared, though that trend has reversed lately.
Finally, the current numbers are influenced by what economists call “base effects,” or skewed comparisons with a year ago when government restrictions put much of the economy in limbo. Those base effects are likely to dissipate when the June numbers come out next month.
This is breaking news. Please check back here for updates.
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