Fed’s favored inflation measures get a big upward revision going back across this bout of inflation.
By Wolf Richter for WOLF STREET.
The Bureau of Economic Analysis has adjusted its Personal Consumption Expenditure data going back to Adam and Eve as part of its “comprehensive update of the National Economic Accounts.” With these adjustments, the new versions of the PCE price index, the “core” PCE price index, and the “core services” PCE price index were revised higher across this bout of inflation. In other words, inflation has been hotter.
The revised PCE price index accelerated to 3.5% in August, from the revised 3.4% in July. The old version’s July reading had come in at 3.3%.
The new version’s June was raised higher to 3.2%, from the old version of 3.0%. The new version’s peak in June 2022 was revised higher to 7.12%, up from 6.98% for the old version. The chart shows the new revised index through August in red and the old data through July in green:
The revised “core” PCE price index (excludes food and energy products) rose 3.9% year-over-year for August, still nearly double the Fed’s target. But it was a deceleration from the revised 4.3% in July.
The revised July of 4.3% was up from the old July of 4.2%. The revised version (red) had topped out at 5.6% in February 2022, while the old version (green) had topped out at 5.4%.
“Core services” PCE price Index (services without energy services), a crucial metric because it shows where underlying inflation has gotten entrenched, was revised substantially higher for the years back through 2020.
The original version (green) had peaked at 5.54% in February 2023, which has now been revised to 5.82% (red). These are big upward revisions!
July was revised up from 5.40% to 5.45%. June was revised up from 5.00% to 5.24%.
Today’s core services PCE price index for August rose by 5.1%, a decelerating from the revised July.
On a month-to-month basis, the new core services PCE price index rose by 0.2% in August. A deceleration from the 0.5% spike in July, in hugely volatile month-to-month data:
The durable goods PCE price index was also revised going back to Adam and Eve, but not by significant amounts.
In August, the index fell by 1.9% from a year ago, unwinding the monster spike, driven by a drop in prices for motor vehicles, household furnishings, recreational goods and vehicles, and other goods (revised = red; old = green):
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