The latest gross domestic product report, released on Thursday, highlighted two new measures of inflation that support the continuation of the disinflation trend. The Commerce Department, in response to user requests, broke down the price indexes for Personal Consumption Expenditures (PCE) excluding food, energy, and housing, as well as PCE services excluding energy and housing. These new measures provide valuable insights into inflation trends, particularly in non-housing services, an area of interest for Federal Reserve officials.
In the second quarter, the PCE price index excluding food, energy, and housing decelerated to a 3% rate, compared to 4.1% in the first quarter. Similarly, PCE services excluding energy and housing slowed to a rate of 3.5%, down from 5.1%. As Fed officials frequently emphasize, core measures of inflation tend to be more accurate predictors of future inflation compared to headline measures.
During his recent press conference, Federal Reserve Chair Jerome Powell discussed his analysis of core inflation in three categories. He noted that there were significant declines in core inflation, primarily in the goods sector, as well as some minor decreases in housing services and non-housing services.
The broader core PCE price index remained unchanged at 3.7% for the second quarter, according to previous estimates. These latest data points provide valuable indications of ongoing disinflationary pressures in the economy.