Fed’s Favorite Inflation Indicator Continues To Show No Signs Of Runaway Tariff Costs

First things first, this is September data… so horribly lagged/stale… but, it’s all we have, so let’s dive in.

The Fed’s favorite inflation indicator – Core PCE – rose 0.2% MoM (as expected), which leave it up 2.8% YoY (as expected), slightly lower than August +2.9%…

Source: Bloomberg

On an annual basis, the headline PCE rose 2.8%, up modestly from 2.7% YoY in August (as expected). That is the highest since April 2024, but again remains in the range of the last two years…

…showing no signs at all of the runaway tariff-driven costs that so many establishment economists proclaimed was imminent.

Services costs (not tariff-related directly) attributed the most to the rising costs while Goods prices were barely positive…

The closely-watched SuperCore PCE slipped to +3.25% YoY…

… as Financial Services and Food Service/Accommodations stalled out.

Also trending lower overall, ruining the ‘Trump will kill us all with tariffs’ narrative.

Meanwhile, amid rising prices, income growth outpaced spending growth for a change…

This left the savings rate at 4.7%, unchanged from August and at lowest since Dec 2024…

One place where there continues to be tangible improvement is the divergence between private and government sector wage growth in September: 

• Private worker wages up 5.8% in Sept, up from 5.2% and highest since March 2024
• Govt worker wages up 4.2% in Sept, unch vs August and lowest since August 2021

TL/DR: while this data is admittedly stale, it shows no signs of 1) tariff-driven inflation or 2) a suffering consumer.