Minneapolis CNN —
The Federal Reserve’s preferred inflation gauge showed prices rose at a slower pace last month, indicating further progress in the central bank’s battle with higher prices.
The Personal Consumption Expenditures price index, or PCE, rose by 5% in December, compared to a year earlier, the Commerce Department reported Thursday.
In December alone, prices rose 0.1% from November.
On a month-to-month basis, prices for goods decreased 0.7% and prices for services increased 0.5%, according to the PCE price index for December. Within those categories, food prices increased 0.2% and energy prices decreased 5.1%.
Core PCE, which doesn’t include the more volatile food and energy categories, increased by 4.4% annually, down from November’s annual rate of 4.7%. On a monthly basis, it was up 0.3%.
Core PCE, which is now at its lowest level since October 2021, is the Fed’s favored inflation gauge as it provides a more complete picture of consumer costs and spending.
The data showed that Americans pulled back in December, with spending falling by 0.2% from the month before. Personal income rose 0.2% last month, the smallest increase since April.
Through much of 2022, consumer spending remained robust in spite of high inflation, rising interest rates, and simmering recession fears. However, as the months dragged on, economic data suggested that consumers were running out of dry powder: Reliance on credit grew and delinquencies started to tick up, while savings levels declined.
Retail sales fell 1.1% in December, the Commerce Department reported earlier this month.
This story is developing and will be updated.
