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The Commerce Department’s Personal Consumption Expenditures price index – a measure of inflation closely watched by the Federal Reserve, rose in line with expectations in January, increasing 0.4% on a monthly basis and 2.8% from a year earlier, excluding food and energy costs. With those factored in, inflation was up 0.3% and 2.4% on the month and year respectively. Thursday’s Personal Income and Outlays report also showed that consumers held back on some purchases in January. Spending rose 0.2% for the month, a cooling from the 0.7% leap a month prior. However, when taking the inflated prices out of the equation, “real” spending dipped by 0.1% for the month as they bought far fewer goods (especially fewer trucks) and pulled back on some services purchases. During the month, goods spending fell 1.1% while services spending increased 0.4%. “We have expected consumers to reign in their spending this year after drawing down the pandemic-related savings,” Kathy Bostjancic, Nationwide chief economist, wrote in a note following the report. “Overall, [the report] is meeting the expectations, and some of the worst fears in the market weren’t met,” said Stephen Gallagher, chief U.S. economist at Société Générale. “The key is we’re not seeing the broad nature of increases that we had been more fearful of.”
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