Savings Rate Tumbles To One-Year Lows As Fed’s Favorite Inflation Signal Remains ‘Sticky’ High

One of The Fed’s favorite inflation indicators – Core PCE Deflator – slowed to 3.9% YoY in August (its lowest since Sept 2021). Headline PCE jumped up to +3.5% YoY, its highest since May…

Source: Bloomberg

After 3 months of ‘deflation’, Goods prices rebounded strongly in August (up most since June 2022)..

Source: Bloomberg

Even more focused, is the Fed’s view on Services inflation ex-Shelter, and the PCE-equivalent shows that is very much stuck at high levels (ignore the data series, Bloomberg screwed up on revisions)…

Source: Bloomberg

Personal income grew 0.4% MoM and so did Spending…

Source: Bloomberg

But both remain up significantly on a YoY basis…

Source: Bloomberg

Adjusted for inflation, ‘real’ personal spending was higher in August (up 2.3% YoY)…

But Real Disposable Income fell 0.2% MoM (the 3rd monthly decline in Americans’ earnings in a row)…

And Wage growth is slowing:

• August Private worker wage growth down to 4.6%, from 4.9% in July and the lowest since March 21

• August Govt worker wage growth down to 6.8% from 6.9% in July, and the lowest since May

All of which pushed the savings rate lower (amid numerous revisions once again) to 3.9% of DPI – the lowest in a year…

So ‘stickier’ than expected inflation – driven by a re-emergence of goods inflation – and savings rates shrinking again… Bidenomics, bitches!