Fed’s most popular measure of inflation rose 4.7% in Might, round multi-decade excessive

A customer counts his money at the counter while purchasing an item at a Best Buy store in Flushing, New York.

Jessica Rinaldi | Reuters

Follow a measure of the Ministry of Commerce closely monitored by the Federal Reserve.

The price of core personal consumption spending rose 4.7% from a year ago, 0.2 percentage points lower than the previous month but still at the closest levels seen in the 1980s. Wall Street has look for a reading around 4.8%.

On a monthly basis, the measure that excludes volatile food and energy prices, rose 0.3%, slightly below the Dow Jones estimate of 0.4%.

However, key inflation spiked, rising 0.6% on the month, much faster than the 0.2% gain in April. That kept full-year inflation at 6.3%, the same level as in April, and down slightly from March’s 6.6%, the highest level since January 1982.

Additionally, the report reflects pressure on consumer spending, which accounts for nearly 70% of all economic activity in the US.

While personal income rose 0.5% in May, ahead of estimates of 0.4%, income after taxes and other fees, or personal disposable income, fell 0.1% on the month and 3.3% from a year ago. Inflation-adjusted spending fell 0.4 percent, down sharply from a 0.3 percent gain in April, although it increased 2.1 percent year-on-year.

Commodity inflation rose 9.6% while prices of services increased 4.7%, both up 0.1 percentage points from April.

The personal savings rate edged higher, to 5.4%, up 0.2 percentage points from the previous month.

Fed officials are watching the data closely as they look to keep inflation in check. Central bank policymakers typically monitor core inflation more closely because they believe monetary policy is less effective at controlling the ups and downs of gasoline and grocery prices.

However, Fed Chairman Jerome Powell in recent days said he is also closely watching headline numbers as well as gasoline prices averaging around $4.86 per gallon.

The consumer price index, which measures a wide range of goods and services and is watched more closely by the public, rose 8.6% in May, its highest level since late 1981.

In other economic news on Thursday, the Labor Department reported that the number of jobless claims fell to 231,000 for the week ending June 25. The number was down 2,000 from the previous period despite being 1,000 higher. than estimated.

Resume requests, which run one week after the number of headlines, totaled 1.33 million, down slightly from the previous week.

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