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Behind the Numbers: PCE Inflation Update, June 2022

This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. NOTE: Terms in bold are defined in the Inflation Update Glossary.

The headline, or all-items, PCE price index rose an annualized 12.0 percent in June after increasing an annualized 7.2 percent in May. The price index for PCE excluding food and energy rose at a 7.4 percent annualized rate after increasing an annualized 4.3 percent a month earlier. Prices for food and energy rose sharply.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 6.9 percent in June, compared with a 5.2 percent rate in May.

Over the six months ending in June, the trimmed mean averaged an annualized 4.8 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 7.7 percent and 4.8 percent, respectively.

The 12-month trimmed mean inflation rate was 4.3 percent in June, up from 4.0 percent in May. The 12-month inflation rate for headline PCE was 6.8 percent, up from 6.3 percent in May, while the 12-month inflation rate for PCE excluding food and energy was 4.8 percent, versus 4.7 percent a month earlier.

Gasoline Prices Up Sharply

The price index for gasoline and other motor fuel rose a seasonally adjusted 11.0 percent in June after increasing 4.1 percent in May. Gasoline and motor fuel alone accounted for 3.6 percentage points of June’s annualized 12.0 percent headline inflation rate. Prices for the other major energy components were mixed, with the price index for fuel oil down 1.2 percent and the price indexes for electricity and natural gas up 1.7 percent and 8.2 percent, respectively. The price index for energy goods and services as a whole rose 7.5 percent in June after increasing 4.0 percent in May.

The price index for gasoline was up 60.7 percent for the 12 months ending in June; it had been up 48.5 percent for the 12 months ending in May. Compared with June 2021, the price index for fuel oil was up 98.5 percent, while the price indexes for electricity and natural gas were up 13.9 percent and 38.2 percent, respectively. The price index for energy goods and services as a whole was up 43.5 percent over the 12 months.

After June’s sharp increase, the price index for gasoline is likely to show a sharp decline when PCE data for July are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 7.2 percent decrease in July before seasonal adjustment. The typical seasonal pattern for July—what we would expect given normal changes in supply-and-demand conditions—amounts to a change in price of roughly zero, making the DOE data consistent with a 7.2 percent decrease in the seasonally adjusted gasoline price index. A decrease of that size would subtract about 2.4 annualized percentage points from July’s headline inflation rate.

Food Prices Rise

The price index for food and beverages purchased for off-premises consumption rose at a 12.5 percent annualized rate in June after increasing at a 15.8 percent rate in May. The increase in the aggregate reflects a large increase in the prices of more-processed food items (up an annualized 17.9 percent); prices of less-processed food items were essentially unchanged for the month.

The price index for food as a whole was up 11.2 percent over the 12 months ending in June. The 12-month increase in the aggregate reflects a 10.9 percent rise in the prices of less-processed items and an 11.4 percent increase in the prices of more-processed items.

Core Goods, Services Prices Climb

Prices for core goods rose an annualized 8.1 percent in June after increasing an annualized 4.2 percent in May.

Among core goods, the price index for window coverings (down an annualized 38.0 percent) had the largest negative impact, subtracting about 0.1 annualized percentage points from June’s core rate. At the other end of the spectrum, the price index for newspaper and periodicals (up an annualized 63.1 percent) had the largest positive impact, contributing about 0.3 annualized percentage points to June’s core rate.

For the 12 months ending in June, prices for core goods were up 5.5 percent, identical to their increase for the 12 months ending in May.

Prices for core services, meanwhile, rose an annualized 7.1 percent in June after increasing an annualized 4.3 percent in May. Among components experiencing outsized changes, the price index for financial service charges, fees and commissions (down an annualized 16.7 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.5 annualized percentage points from June’s core rate. The price index for owner-occupied stationary homes (up an annualized 8.7 percent) had the largest positive impact, contributing about 1.0 annualized percentage points to June’s core rate.

Our “big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at a 9.0 percent annualized rate in June, compared with an 8.0 percent rate in May. Individually, the annualized increases were 9.7 percent for rent, 8.7 percent for OER and 9.2 percent for dining out (more formally, “other purchased meals”).

For the 12 months through June, the big three index was up 6.2 percent, compared with a 5.8 percent increase for the 12 months through May. The price index for core services as a whole rose 4.5 percent for the 12 months ending in June, compared with a 4.4 percent increase for the 12 months through May.

Trimmed Mean PCE Inflation Rate
Trimmed Mean PCE
PCE Inflation Update
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