Not encouraging: core PCE price index refuses to come down, and has moved sideways since July last year.

The inflation index favored by the Fed, the core PCE price index – which, by excluding the food and energy products, is a measure of underlying inflation – re-accelerated in April, as services inflation re-accelerated back into the red-hot zone, and as durable goods prices rose, after falling for months, driven by a jump in motor vehicles and parts.

Inflation is just churning from one product category to another, falling here but popping up again over there like the arcade game of Whack A Mole. And so the core PCE price index continues to be stuck near the 5% level when the Fed’s target is 2%. And the Fed uses this core PCE index as yardstick.

On a year-over-year basis, the core PCE price index jumped by 4.7%, same as in July 2022, and up from a 4.6% increase in March, according to data from the Bureau of Economic Analysis today. It has now gone sideways at just under 5% for nearly a year, and is not coming down, but is only shifting from category to category.

Inflation in services re-accelerated in April from March, driven by spikes in insurance and financial services, and “other” services such as personal services, and big increases in healthcare and housing costs.

Inflation is particularly difficult to wring out of services, but services are where the majority of consumer spending ends up: healthcare, housing, utilities, education, travel, entertainment, restaurant meals, streaming, subscriptions, broadband, cellphone services, etc…..

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