US July PCE inflation rises 3.7% year-on-year, topping forecasts

The United States' personal consumption expenditures (PCE) price index rose 3.7 percent in July from a year earlier, well above the Federal Reserve's 2 percent target.

The Commerce Department said Wednesday (local time) that the July PCE price index climbed 3.7 percent year-on-year and 0.2 percent from the previous month. Both figures exceeded Dow Jones consensus forecasts by 0.1 percentage point.

The core PCE price index for July, which strips out volatile energy and food costs, rose 3.3 percent from a year earlier and 0.2 percent from the prior month, in line with analyst expectations.

Breaking down the components, services prices rose 0.3 percent from the previous month while goods prices fell 0.8 percent. Financial services and insurance surged 24.3 percent, healthcare climbed 23.2 percent, and housing and utilities gained 16.4 percent.

On the other hand, gasoline and other energy goods prices dropped 14.0 percent, recreational goods and vehicles fell 13.6 percent, and motor vehicle parts declined 9.4 percent.

The PCE price index tracks the prices of goods and services consumed by households and serves as the Fed's preferred gauge for assessing progress toward its 2 percent inflation target. With the headline reading exceeding both the Fed's goal and market forecasts, concerns may resurface that the slowdown in US inflation has not advanced far enough.

However, some analysts noted that the core PCE reading came in line with expectations, suggesting inflation pressures have not significantly worsened.

Personal income in July rose 0.4 percent from the prior month, while disposable income increased 0.5 percent, according to data released the same day. The personal saving rate stood at 3.0 percent.