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US consumers continued to spend in June, powering the economy in the process, despite tariff-related price hikes becoming more present on store shelves and online.
Consumer spending rose 0.3% from May, when spending was flat, according to Commerce Department data released Thursday.
The report — which provides a comprehensive look on how prices are changing as well as households’ income, spending and savings — also showed that inflation picked up as well last month.
The Personal Consumption Expenditures price index — the inflation gauge the Federal Reserve uses for its 2% target rate — rose 0.3% on a monthly basis, which lifted the annual rate to 2.6%, the highest since February.
Economists were expecting PCE to rise 0.3% from 0.2% in May and accelerate on an annual basis to 2.5% from the initially reported 2.3% increase (May’s annual inflation rate was revised upward to 2.4% in Thursday’s report).
The PCE price index was expected to heat up slightly in part because of rising gas prices, which had been falling for much of the year, as well as pricier goods from businesses passing along tariff-related costs to consumers.
That was indeed the case, according to Thursday’s report: Energy prices shot up 0.9% after falling 1% the month before. Goods prices rose 0.4%, the highest monthly rate since January (when prices bumped higher after holiday season discounts).
Excluding energy and food, which tend to be quite volatile, the “core” PCE index showed price hikes picked up speed in June, rising 0.3% from May (the fastest gain in four months), and holding at an annual rate of 2.8%
Stock futures were relatively unchanged after the latest spending and inflation data. Dow futures were up 100 points, or 0.23%. S&P 500 futures rose 0.92% and Nasdaq 100 futures gained 1.33%.
This story is developing and will be updated.
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