Inflation Holds at 3.7% as Spending Stalls

Inflation stayed stuck in July and American shoppers stopped spending, according to Commerce Department data released Wednesday.

The personal consumption expenditures price index — the Federal Reserve's preferred inflation gauge — rose a seasonally adjusted 0.2% for the month, leaving the annual rate at 3.7%.

Both figures came in 0.1 percentage point above the Dow Jones consensus, CNBC reported. Economists surveyed by FactSet had expected a 0.1% monthly rise and a slowdown in the annual rate to 3.6%, according to CNN.

Consumer spending, adjusted for inflation, was flat from the month before — a sharp slowdown from a 0.4% gain in June.

The Numbers

Headline PCE: up 0.2% in July, up 3.7% over 12 months.

Core PCE, which strips out volatile food and energy prices: up 0.2% for the month and 3.3% from a year earlier — in line with forecasts. Fed policymakers generally treat core as the better read on the longer-term trend, CNBC noted.

Inflation-adjusted consumer spending: flat in July, after 0.4% growth in June.

Second-quarter GDP: unrevised at 1.5%, Reuters reported Wednesday.

The Fed targets 2% inflation on the PCE measure. July's reading is well above that.