There is no good news on inflation or spending in recent data.
The Personal Income and Outlays Report for February 2025 shows stronger than expected inflation, and weak real spending.
I produced some new charts today to show what’s happening on the inflation front.
PCE Inflation Detail Month-Over-Month
- PCE: +0.3 Percent
- PCE Goods: +0.2 Percent
- PCE Services: +0.4 Percent
- Core PCE: +0.4 Percent
Core PCE excludes food and energy.
The Fed cares more about services than goods, and more about core than overall PCE. Thus, 0.4 percent on both the core and services was a disaster.
And Tariffs are highly likely to impact PCE goods inflation to the upside.
PCE Inflation Detail Year-Over-Year
PCE Year-Over-Year Change
- PCE: 2.5 Percent
- Core PCE: 2.8 Percent
- PCE Goods: 0.4 Percent
- PCE Services: 3.5 Percent
Year-over-year goods bottomed 5 months ago, PCE 5 months ago, and core 8 months ago. Services bottomed last much but is a general disaster.
Five Measures of Inflation Percent Change Year-Over-Year
Progress has also stalled on the CPI. Since September of 2024, the year-over-year CPI rose from 2.4 percent to 2.8 percent.
Core CPI was 3.2 percent in July of 2024. Progress is a mere 0.1 percentage points in seven months.
Rent is still in a downturn but 4.1 percent is nothing to brag about. And shelter is about 35 percent of the CPI.
Personal Income Strong, Details Weak, Spending Anemic
Personal income was strong in February, up 0.9 percent. However, all of the strength was in Personal Current Transfer Receipts (PCTR).
PCTR is income for which no work was performed. Examples include Medicare, Medicaid, Food Stamps, disability payments, and Social Security.
Real Personal Income excluding PCTR was up a mere 0.1 percent. In determining recessions, the NBER looks at this component.
For discussion and several charts, please see Real Disposable Personal Income Up 0.5%, Real Spending Up 0.1% in February
Consumers seem to be hunkering down in February as income outpaces spending.
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