Core Inflation Holds Steady as Income, Spending and Growth Pick Up — Evening Brief – 06.25.26
The Federal Reserve’s preferred measure of inflation remained elevated in May, while stronger-than-expected personal income growth and an upward revision to first-quarter GDP underscored the resilience of the U.S. economy despite persistent price pressures.
The core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, rose 0.3% in May from the previous month, matching economists’ expectations and maintaining April’s pace, according to data released Friday by the Bureau of Economic Analysis. April’s monthly increase was revised up from 0.2%.
On an annual basis, core PCE increased 3.4%, in line with forecasts and slightly above April’s 3.3% pace. The headline PCE price index climbed 0.4% during the month and 4.1% from a year earlier, matching consensus estimates and accelerating from April’s 3.8% annual increase.
Consumer finances remained healthy despite higher inflation. Personal income rose 0.7% in May, exceeding expectations for a 0.4% gain and rebounding from flat growth in April. Personal spending also increased 0.7%, outpacing forecasts, as consumers continued to spend despite elevated prices. The personal saving rate held steady at 3.0%, remaining well below the 4.6% recorded a year earlier.
Separately, the Bureau of Economic Analysis revised first-quarter U.S. GDP growth higher to an annualized 2.1%, up from the previous estimate of 1.6% and well above the 0.5% pace recorded in the fourth quarter of 2025. The revision reflected lower imports, partially offset by softer consumer spending.
Business investment, exports, government spending and consumer spending all contributed to economic growth, with the information, federal government, professional and technical services, and durable goods manufacturing sectors leading the expansion. Corporate profits also improved, rising at a 0.5% annualized rate during the quarter, reversing an earlier estimate of a decline.