Inflation is Cooling Off

Also, last Friday the Fed’s favorite inflation report the PCE was released and this index dropped by 0.1% in July and year over year inflation dropped from 6.8% to 6.3%. The Core PCE rose by 0.1% and core prices are up 4.6% from last year.

Within this same report we see that personal income only rose 0.2% in July and personal income is up 4.6% year over year. Personal consumption or spending only rose 0.1% in July and spending is up 8.7% from a year earlier. However, private-sector wages and salaries rose 0.9% in July and wages and salaries are up 11% from last July. So, why did personal income only increase by 0.2%? It’s because government transfer benefits are dropping.