October PCE Ticks Higher

Key Takeaways:

• The PCE price index showed a year-over-year increase of 2.3% in October, up from September’s 2.1%
• Housing-related expenses rose 0.4% month-over-month and 4.9% year-over-year,
• Personal income rose by 0.6% in October

Inflation Stays Stubbornly High

October’s personal consumption expenditures (PCE) price index revealed that inflation remains a challenge for the Federal Reserve. Headline inflation rose 2.3% year-over-year, an increase from 2.1% in September, with core inflation (excluding food and energy) climbing 2.8%. Month-over-month, headline and core inflation rose 0.2% and 0.3%, respectively, in line with prior months.

Rising services costs were a key driver, with prices increasing 0.4% last month while goods prices dropped 0.1%. Services inflation is particularly impactful as Americans spend twice as much on services as goods. Energy prices offered some relief, declining 0.1% in October and 5.9% year-over-year.

Housing and Income Trends Shape the Picture

Housing costs continued to weigh heavily on inflation, rising 0.4% month-over-month and 4.9% year-over-year, matching September’s pace. As the largest expense for most households, slow-moving categories like housing and utilities keep inflation elevated. Financial services and insurance costs also surged, jumping 0.7% month-over-month and 6.3% year-over-year, reflecting rising stock market values.

Amid these inflationary pressures, personal income saw a significant 0.6% increase in October, doubling economists’ expectations. This growth in income, coupled with higher spending and savings rates, signals resilience in consumer financial health despite ongoing price pressures.