October PCE -0.5% As Inflation Dies, Consumer Spending -1%, New Home Sales -5.3%, Median Price $218k

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were -0.5% in October and +3.2% year-over-year through October. Excluding volatile oil and food costs from the readings, “Core” PCE for October was unchanged and +2.0% YOY through October. Here’s a link to complete PCE numbers for 3Q2008.

The Fed tends to look at Core PCE excluding food and energy prices because of the price volatility of these items, and the Fed’s zone for reasonable inflation is 1-2% per year. The Core number is right at the 2% level which is now getting within their comfort zone. This is due largely to the fact that oil is at $51 now versus $145 early-summer. The Fed’s next FOMC rate-setting meeting is December 16, although day-to-day crisis management takes precedence over any set meetings right now.

In related economic news, consumer spending was down 1% for October, the most in 7 years. Jobless claims for the week were at 529,000 seasonally adjusted. And new home sales were down 5.3% which represents 433,000 sold homes nationwide—the lowest pace since 1991. The median price of a new home sold in October was down 7% year-over-year to $218,000, which is at September 2004 levels.