Ian Patrick, FISM News
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One day after data showed a rise in GDP for the third quarter of 2022, a preferred economic metric revealed that the core rate of inflation increased during the month of September.
This news could potentially further harm voters’ perception of the Democrat party since inflation and the economy are repeatedly proving to be the most important factors ahead of the midterms, which are now nearly a week away.
The data which put a damper on the GDP numbers came out on Friday morning from the Bureau of Economic Analysis. It shows that the personal consumption expenditures (PCE) price index rose by 0.3% by the end of September. The core PCE rate, which excludes food and energy in its analysis, rose 0.5% in the same time period.
When compared to the same month in 2021, the PCE index in September 2022 has risen by 6.2% — unchanged from the same time period comparison for August. The core PCE index rose to 5.1% in September 2022 compared to the same month last year. This shows a slight increase from the year-over-year comparison for August, which sat at 4.9%.
MarketWatch’s Jeffry Bartash says that the regular PCE rate was aided by a slight decline in gas prices. However, when compared to the core PCE rate, the data shows “easing but still-high price pressures” in other areas of life.
Chad Moutray, the chief economist for the National Association of Manufacturers, tweeted that this accelerating inflation data means “solid price growth has continued unabated” for the time being.
With core inflation accelerating instead of moderating, this suggests that solid price growth has continued unabated (at least for now). This was seen in the consumer price index data, as well.
— Chad Moutray (@chadmoutray) October 28, 2022
The core PCE index is typically used by the Federal Reserve as their preferred indicator of inflationary trends. Bartash writes that this is because “the PCE gauge takes into account how consumers change their behavior due to rising prices.”
With this data showing inflation continuing to rise, economists expect the Federal Reserve to further increase the federal fund rate to cool inflationary prices.
Senior economist Lydia Boussour of EY Parthenon told her clients that this data set “confirms the Federal Reserve has more work to do to cool demand and reduce inflation and keep policymakers on track to raise the federal funds rate by another 75 basis points at [its] meeting next week.”
Increasing federal funds rates would likely reduce the incentive for consumers to continue spending “and can even throw the economy into recession,” writes Bartash.
Other economists took hope in the fact that consumers also spent 0.6% more in September than in April, according to other data released from the Commerce Department. However, it may not be enough to tackle the threat of a looming recession.