April PCE Report: Sticky Inflation, but Monthly Core Inflation Dips

The April Personal Consumption Expenditures Price Index showed that the Federal Reserve’s preferred measure of inflation remained sticky during the month.

However, when excluding volatile food and energy costs, the April report showed a modestly improved inflation picture.

The PCE Price Index increased 0.3% during April 2024. Excluding food and energy, the PCE price index increased 0.2%.

Economists had forecast the overall PCE Price Index to rise 2.8% on an annual basis in April, the same rate of inflation as seen in March, according to FactSet’s consensus estimates. Forecasts called for a 0.3% month-over-month increase.

April PCE Inflation Report Highlights

• The PCE Price Index rose 0.30% in April, in line with forecasts and following a 0.32% increase in March.
• Core PCE rose 0.20% in April, below forecasts for a 0.30% increase after rising by 0.32% in March.
• The PCE Price Index year over year rose 2.7% in April, in line with forecasts and following an increase of the same amount in March.
• Core PCE year over year rose 2.8% in April, in line with forecasts and following an increase of the same amount in March.

Preston Caldwell, chief US economist at Morningstar, says the PCE report likely doesn’t change the calculus for the Fed when it comes to any decision to cut - or even go back to raising - interest rates. There is “virtually zero support for the notion the Fed would hike rates in the next 6 months,” he says. “But the Fed is also unlikely to cut rates earlier than September, and even that will require a substantial improvement compared to the elevated inflation rate of the past four months.”

The PCE inflation report itself, Caldwell says, was “fairly uneventful.”

However, he points to the personal spending portion of the report, which showed a 0.1% monthly decline in consumption, adjusted for inflation.

“We already knew from the retail sales data that goods consumption growth would be negative,” he says. “But services also posted weak growth, causing the weak overall consumption growth.”

“Still, the consumption data is very volatile on a monthly basis,” Caldwell says. “On a year-over-year basis - and taking a last 3 month moving average -, it’s up 2.5%, about where it’s hovered since the third quarter of 2023.”