US core PCE inflation holds at 3.1% in September, in line with the 3.1% estimate

The US core PCE price index rose 3.1% year on year in September, according to data released on October 29. The reading matched the 3.1% estimate and compares with 3% previously.

What happened

On a monthly basis, core PCE rose 0.3% in September, against a 0.3% estimate. The previous month also showed 0.3%. The figures came out at 12:30 UTC, together with several other high-impact US releases.

Personal income rose 0.2% month on month, against a 0.3% estimate and 0.3% previously. Personal spending rose 0.5%, against a 0.6% estimate and 0.9% previously.

Third-quarter GDP grew at an annualized quarterly rate of 3.4%, against a 3.2% estimate and 2.2% in the previous reading.

Why it matters

Core PCE strips out food and energy prices. It is a price gauge that tracks consumer inflation, and the annual rate edging up from 3% to 3.1% shows that underlying price pressure did not ease in September.

The spending data show a slower pace than in the prior month. Spending growth fell from 0.9% to 0.5%, and income growth slipped from 0.3% to 0.2%. At the same time, the GDP figure of 3.4% points to a stronger third quarter than the 2.2% previously recorded.

The labor market data released at the same time showed few signs of stress. Initial jobless claims were 194K for the week ended October 24, below the 199K estimate and the previous 195K. Continuing claims were 1701K for the week ended October 17, below the 1720K estimate and the previous 1722K. The four-week average of claims was 196.75K, against a 197K estimate and 198K previously.

The broader PCE price index, which includes food and energy, also came out in the same release and was cited alongside the GDP report. For investors, the core annual rate of 3.1% was unchanged from the 3.1% estimate, so the data added little new information on the inflation trend beyond the small rise from 3%.

What to watch next

The next core PCE release will show whether the annual rate keeps rising from 3.1% or turns back toward the 3% seen previously. Monthly core readings have held at 0.3% for two months in a row.

Spending and income figures will also matter. Both slowed in September, and later data will show whether consumers keep up the pace implied by the 3.4% GDP growth. Weekly jobless claims will remain a regular check on the labor market, with initial claims at 194K in the latest week.