US June PCE Drops 0.1% MoM, First Negative Since 2020

US June PCE fell 0.1% MoM, the first decline since 2020, while Q2 GDP slowed to 1.5% but domestic demand hit a two-year high, complicating Fed policy outlook.

Woofun AI data shows that the US June PCE Price Index decreased by 0.1% month-over-month, marking the first monthly negative reading since 2020. Year-over-year inflation slowed from 4.1% to 3.7%, while core PCE rose 0.1% MoM and fell to 3.3% YoY, remaining above the Federal Reserve's 2% target for the sixth consecutive year. This cooling trend is primarily attributed to falling oil prices following the US-Iran temporary truce.

Despite the second-quarter GDP annualized growth rate slowing from 2.1% to 1.5%, domestic private final sales excluding net exports, inventories, and government spending grew by 3.9%, reaching the highest level since early 2023. Consumer spending, which constitutes approximately two-thirds of the economy, jumped from 0.5% to 3.2%. The Federal Reserve maintained interest rates at 3.5% to 3.75% in a 9-to-3 vote, with three dissenting members advocating for a 25-basis-point hike, highlighting internal divisions as Chair Powell described the economy as showing "remarkable resilience."