August PCE inflation cools to 3.4% YoY, below expectations; core at 3.0%; Q2 GDP revised up to 2.2%

What happened

The Bureau of Economic Analysis released August PCE data Wednesday at 8:30 AM ET alongside the third estimate of Q2 GDP. Headline PCE inflation came in at 3.4% year over year, below the 3.7% consensus and down from July (revised to 3.4%), with a 0.3% monthly gain in line with expectations. Core PCE (ex-food/energy), the Fed's preferred gauge, rose 3.0% YoY, also cooler than expected, with a 0.2% monthly rise. Personal income rose 0.4% and spending 0.6%. Separately, the third estimate of Q2 GDP was revised up sharply to 2.2% from the 1.5% second estimate, driven by stronger consumer spending.

Who’s affected

• Broad U.S. equities: cooler inflation supports easing October-hike odds, but methodology caveat limits the dovish read
• Treasuries: yields slipped after the print (10-year back under ~5.24%), though long-end pressure persists
• Rate-sensitive sectors (homebuilders, utilities, small caps): modest relief on lower hike expectations
• Energy/oil: crude bid higher on Middle East risk (Brent ~$103, WTI ~$90.60), capping equity upside from the inflation relief

Sources

marketwatch.combarrons.cominvestopedia.combarrons.com