Core PCE +0.1% July and +1.4% YOY, Inflation OK. Savings at +4.2% As Consumers Hold Back.

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were even in July and -0.8% year-over-year through July. Excluding volatile oil and food costs from the readings, “Core” PCE price index for July was +0.1% and +1.4% YOY through July. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these two items, and the Fed’s zone for reasonable inflation is 1-2% per year. At +1.4%, Core inflation is within their comfort zone, especially since Fed chairman Ben Bernanke confirmed tame inflation last month and since this month is the second straight month to show a drop. Personal income was flat in July after falling 1.1% in June, and households are still hoarding cash with the Personal Savings Rate rising +4.2%. This is off from May’s +6.9% savings rate which was the highest level ever. Below are all key details from the Personal Income & Outlays report.