US June PCE Rises 3.7% Year-on-Year... Matches Expectations

Core PCE Rises 3.3% in June
Falls 0.1% Month-on-Month as Energy Prices Plunge
Consumer Spending Remains Strong... Real PCE Up 0.4%

The U.S. inflation rate for June slowed compared to the previous month, aided by falling gasoline prices during the U.S.-Iran ceasefire. However, as military conflicts in the Middle East have recently intensified again, some observers warn that the slowdown in inflation might be temporary due to rebounding oil prices.

The U.S. Bureau of Economic Analysis (BEA) announced on June 30 (local time) that the Personal Consumption Expenditures (PCE) Price Index rose 3.7% year-on-year in June. This is a 0.4 percentage point decrease from May's surge of 4.1%, which was the highest since April 2023.

On a month-on-month basis, the index declined by 0.1%. This marks the first time since April 2020 that the PCE price index has decreased compared to the previous month. In May, the index had risen by 0.5% from the previous month.

Excluding the volatile energy and food sectors, the core PCE price index increased by 3.3% year-on-year, a slight slowdown from May's 3.4%. On a monthly basis, the core index rose 0.1%, a smaller increase than May’s 0.3%.

The year-on-year increases for both the headline and core PCE price indices were in line with market expectations. However, the month-on-month increase in the core index was below the market forecast of 0.2%.

The easing of inflation in June was mainly driven by falling energy prices. International oil prices, which had surged due to the U.S.-Iran war, fell as an unstable ceasefire between the two sides continued, and this decline was reflected in energy prices such as gasoline. The year-on-year increase in the PCE price index had accelerated from 2.9% in February, to 3.5% in March, 3.8% in April, and 4.1% in May, but dropped to 3.7% in June.

However, with armed clashes between the U.S. and Iran resuming recently, there is a possibility that inflation could rebound. Brent crude oil prices have climbed above 90 dollars per barrel, and the average price of gasoline in the United States has once again exceeded 4 dollars per gallon. There is skepticism as to whether June's trend of easing inflation will continue in the coming months.

By category, service prices increased by 0.1% from the previous month, while goods prices fell by 0.6%. Durable goods prices, including cars and parts, were unchanged from the prior month, but prices for nondurable goods fell by 1.0% due to a sharp drop in energy products such as gasoline.

In the service sector, transportation service prices jumped 0.6% from the previous month, while healthcare and financial & insurance service prices rose 0.3% and 0.2%, respectively. In contrast, the prices of entertainment services and dining & accommodation services each decreased by 0.1%.

The PCE price index measures changes in the prices of goods and services purchased by U.S. consumers. The Federal Reserve (Fed) uses the PCE price index as a primary indicator in assessing whether it is achieving its 2% inflation target.

Also announced on this day, personal income in June increased by 0.2% from the previous month. Nominal personal consumption expenditures rose by 0.3%, while real personal consumption expenditures, which exclude the effect of inflation, increased by 0.4%. Disposable income grew by 0.2% in nominal terms and 0.3% in real terms. The personal savings rate fell to 2.7%, down from 2.8% in May—the lowest level since June 2022.

This content was produced with the assistance of AI translation services.