Core PCE inflation held at 3.3% in July as real consumer spending barely moved

by Tomas Ferreira · August 26, 2026

Markets Reporter, US Market Current

The price index for personal consumption expenditures rose 0.2 percent in July from June and 3.7 percent from a year earlier, the Bureau of Economic Analysis said in its Aug. 26 release. The measure excluding food and energy, the one the Federal Reserve leans on most heavily, also rose 0.2 percent on the month and stood 3.3 percent above July 2025.

The spending side of the same report was the softer half. Consumer outlays rose $36.3 billion, or 0.2 percent, in current dollars. Adjusted for prices, real personal consumption expenditures rose $1.3 billion, less than 0.1 percent at a monthly rate, meaning essentially all of the nominal gain was absorbed by inflation. Beneath the total, the BEA said the increase reflected an $86.2 billion rise in spending on services that was partly offset by a $49.9 billion decline in spending on goods.

Incomes held up better than spending. Personal income increased $115.1 billion, or 0.4 percent, and disposable personal income increased $125.9 billion, or 0.5 percent. Real disposable income rose 0.4 percent after a 0.3 percent gain in June. Personal saving totaled $712.0 billion in July, a saving rate of 3.0 percent of disposable income. The agency also noted that its estimates for April through June were updated to reflect revised Bureau of Labor Statistics employment, hours and earnings data and revised information on Medicaid benefits.

The release settles a calendar question that had been muddled in market commentary this week. The July personal income and outlays release, which carries the PCE price data, is BEA release 26-39, embargoed until 8:30 a.m. Eastern on Wednesday, Aug. 26; the second estimate of second-quarter GDP is BEA release 26-38 and carries the same embargo. The Census Bureau's advance durable goods report was stamped for immediate release the same day. Any reference to a PCE report circulating on Tuesday, Aug. 25 was either a preview or a reference to the earlier, June-vintage report; no new PCE data was published Tuesday. Charles Schwab's market-open note, published as of 9:08 a.m. ET on Aug. 25, listed July PCE and core PCE, the second-quarter GDP second estimate and July durable orders among Aug. 26 items.

The second estimate of second-quarter gross domestic product landed in the same 8:30 a.m. batch. Real GDP increased at a 1.5 percent annual rate in the April-June quarter, and the BEA said it "increased at the same rate as in the advance estimate." That is a step down from the 2.1 percent annual rate recorded in the first quarter. Growth came from consumer spending, exports and investment, partly offset by a decline in government spending, with an increase in imports subtracting from the total.

The unchanged headline concealed offsetting revisions. Real final sales to private domestic purchasers, which combines consumer spending with private fixed investment and is often treated as the cleanest read on underlying demand, increased 4.2 percent, revised up 0.3 percentage point from the previous estimate. In its technical notes on the revision to real GDP, the BEA said an upward revision to consumer spending was partly offset by an upward revision to imports. Real gross domestic income rose 2.2 percent in the quarter after 1.2 percent in the first quarter; the average of real GDP and real GDI, a measure the BEA publishes because the two should in principle track each other, came in at 1.8 percent.

The quarterly price measures inside the GDP accounts run hotter than the monthly year-over-year figures and should not be read as the same statistic. The price index for gross domestic purchases increased at a 5.8 percent annual rate in the second quarter, revised up 0.1 percentage point. The PCE price index within the accounts increased at a 5.3 percent annual rate, revised up 0.2 percentage point, and the measure excluding food and energy increased at a 3.6 percent annual rate, also revised up 0.2 percentage point. Those are annualized quarterly rates covering April through June, distinct from July's 3.7 percent and 3.3 percent twelve-month readings.

The second estimate also carried the quarter's corporate profits data. Profits from current production increased $400.9 billion in the second quarter after a $74.4 billion increase in the first, according to the BEA release.

The third report in the batch came from the Census Bureau, whose advance report showed new orders for manufactured durable goods rose $3.6 billion, or 1.1 percent, in July to $339.3 billion. Transportation equipment did most of the work, rising 2.3 percent to $116.2 billion. Excluding transportation, new orders rose 0.4 percent; excluding defense, they rose 1.3 percent. Shipments rose 1.0 percent.

The category economists watch as a proxy for business equipment investment was the weak spot. New orders for nondefense capital goods excluding aircraft rose 0.2 percent in July after a 1.7 percent June increase, according to the Census Bureau's advance tables. Shipments in the same category, which feed directly into the equipment line of the GDP accounts, rose 1.4 percent after 2.4 percent in June.

Market pricing ahead of the print had been leaning away from further tightening rather than toward it. FXStreet, citing the CME FedWatch Tool in a preview published at 08:00 GMT on Aug. 26, hours before the data, wrote that futures markets were pricing a 38 percent chance of a quarter-point rate hike next month, down from 55 percent one month earlier. The same piece flagged Fed Chairman Kevin Warsh's remarks at the Jackson Hole central bankers' meeting on Friday as the next event for policy expectations.

Market pricing ahead of the print had been leaning away from further tightening rather than toward it. FXStreet, citing the CME FedWatch Tool in an Aug. 26 preview published before the data, wrote that futures markets were pricing a 38 percent chance of a quarter-point rate hike at the September meeting, down from 55 percent a month earlier. The same piece flagged Fed Chair Kevin Warsh's Jackson Hole remarks later this week as the more consequential event for policy expectations, with the annual payroll benchmark revision also due Friday.

The equity backdrop was set by Tuesday's session, the last one completed before the data. The S&P 500 closed Aug. 25 at 7,677.28, up 24.42 points or 0.32 percent; the Nasdaq Composite finished at 26,151.30, up 171.11 points or 0.66 percent; the Dow Jones Industrial Average ended at 53,577.40, up 160.24 points or 0.30 percent; and the Russell 2000 closed at 3,010.02, up 14.94 points or 0.50 percent. Wednesday's session was still open as of roughly 11:20 a.m. Eastern, and no closing levels for the day existed yet.

The next scheduled updates are already on the calendar. The BEA said the third estimate of second-quarter GDP and the August personal income and outlays report are both due Sept. 30 at 8:30 a.m. Eastern. Before then, the September Federal Open Market Committee meeting will have to weigh a core inflation rate still more than a percentage point above the central bank's 2 percent objective against a consumer whose real spending has stopped growing.