PCE Inflation Moderated in December

The Fed's preferred gauge of inflation fell to its lowest level in more than a year

Consumer shopping at a supermarket

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The Federal Reserve’s preferred gauge of inflation fell to its lowest level in more than a year in December as prices for goods declined, and consumers cut back on spending.

The core Personal Consumption Expenditures (PCE) Price Index, which leaves out volatile food and energy prices, was up 0.3% last month to an annual rate of 4.4%, the Commerce Department reported Friday. That was down from 4.7% in November and the lowest 12-month total since October 2021.

The headline PCE Price Index advanced 0.1% for the month and 5% year-over-year, a drop from the previous month’s 5.5% pace and the smallest annual rate since September 2021.

Goods prices tumbled 0.7%, led lower by a 5.1% slump in energy costs. Food prices were up 0.2%, while prices for services increased 0.5%.

Spending Down

The report also showed consumer spending adjusted for inflation slipped 0.3%, the second consecutive month of declines. Personal income growth slowed, rising 0.2%, the smallest gain in eight months.

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  1. Bureau of Economic Analysis (BEA). "Personal Income and Outlays: December 2022."

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