MNI DATA ANALYSIS: US June Core PCE Prices At +1.9% Y/Y>

--Core PCE Prices Up 0.1% M/M; May Y/Y Rate Revised Down To +1.9%

--Nominal PCE Up 0.4%, Real PCE Up 0.3% 

By Kevin Kastner, Harrison Clarke, and Shikha Dave

     WASHINGTON (MNI) - Nominal PCE rose 0.4% in June, a smaller gain 

than the 0.5% increase expected, while core PCE prices rose 0.1% to put 

the year/year rate at 1.9% after May was revised down to that point, 

data released by the Bureau of Economic Analysis Tuesday morning 

suggested. 

     The 1.9% year/year rate for core PCE prices is the third in a row, 

after annual revisions to the rate at 2.0% in March, but it remains very 

close to the Fed's target and should not cause any concern as the FOMC 

meets this week.

--PCE GROWTH SLOWS

     The 0.4% gain in current dollar PCE, below the 0.5% rise expected, 

followed a sharply upward revised 0.5% gain in May. Spending on durable 

goods was flat in the month, while nondurable goods spending fell 0.1% 

on a 0.1% decline in energy prices. Services spending was up 0.6%.   

     Real PCE was up 0.3% in June, as the overall PCE price index was 

up 0.1% despite the fall in energy prices. The overall PCE price index 

was up 2.2% year/year, the same as in May. 

     After inflation adjustment, durable goods PCE was up 0.4%, while 

real nondurable goods PCE was down 0.1% and real services PCE was up 

0.4%. 

--INCOME GROWTH, SAVINGS RATE STEADY

     Personal income growth was supported by a 0.4% gain in wages and 

salaries, as well as increase in the other income categories. 

     The saving rate was unchanged in June from 6.8% in May, with higher 

levels than previously reported due to the benchmark revisions reported 

on Friday. The savings rate was down from the 7.2% average rate in the 

first three months of the year. 

     Personal taxes rose by 0.3% in the month after a 0.2% gain in 

May. As a result, disposable personal income rose by 0.4%, the same as 

in May. Real disposable income was up 0.3%, an increase from the 0.2% 

May gain. 

--EMPLOYMENT COST GROWTH SLOWS

     Also released Tuesday, the Employment Cost Index slowed in the 

second quarter to a 0.6% increase, as expected, after a 0.8% increase in 

the first quarter. 

     Despite the slower quarter/quarter growth, the year-over-year 

rate rose to 2.8% from 2.7% in the first quarter due to softer gain in 

the second quarter of 2017. 

     Benefits growth accelerated this quarter to a 0.9% increase after a 

0.7% rise in the first quarter. Benefits were up 2.9% year/year, a 

faster pace than the 2.6% year/year rate in first quarter. 

     Wage and salary growth rose only 0.5% after a 0.9% gain in the 

first quarter, but the year/year pace still moved up to 2.8% from 2.7% 

in the previous quarter.                        

     ** MNI Washington Bureau: 202-371-2121 ** 

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