The Federal Reserve's preferred inflation gauge was much lower than expected, new figures showed.
According to the latest data from the Commerce Department, the personal consumption expenditures price index climbed a seasonally adjusted 0.3% for the month. The 12-month gain stood at 3.4%, below the 3.7% expected by economists.
However, the core index showed a 0.2% increase, below the 0.3% expected by economists. The annual figure stood at 3%, below the 3.3% expected by analysts.
Energy costs led the increase. Gasoline climbed 4.4%, while transportation services gained 1.4%. Energy goods and services rose 2.3%.
Stocks are climbing after the report. The Dow Jones Industrial Average gained 0.28%, while the S&P 500 did so 0.31%. The tech-heavy Nasdaq Composite gained 0.35%.
It is unclear if the figure will be enough to dissuade Federal Reserve policymakers from hiking interest rates further after the September decision as figures still stand well above the 2% inflation target.
Most Fed policymakers indicated back then that another rate increase could be necessary this year. Sixteen of 18 officials who submitted projections at the September meeting expected at least one additional hike in 2026.
At the same time, consumer confidence keeps deteriorating. The Conference Board Consumer Confidence Index released new figures on Tuesday showing that its index fell by 6.7 points, from 88.6 in August to 81.9. The Present Situation Index, which surveys consumers' assessment of business and labor market conditions, and the Expectations Index, based on their outlook for income, business and labor market conditions, also plummeted.
Dana M Peterson, the Conference Board's Chief Economist, said in a statement that figures showed a notable drop. "Consumer appraisals of current business conditions became negative for the first time since September 2024. Perceptions of the current labor market also worsened, though remained within positive territory," she added.
The surge in fuel costs, which is around historical highs, were a key factor in consumers' assessment of the situation. "Consumers also frequently cited politics, trade, and employment in their write-in responses, though to a lesser extent," the document noted.
Peterson went on to say that consumers expect business conditions and the labor market to weaken further in the next six months. Almost all age and income groups shared that view: "While higher-income groups remained generally more optimistic, those with a household income of $125,000-$149,000 reported the greatest decline in confidence over the last six months."
Other surveys have also shown a deterioration of sentiment. The University of Michigan's Survey of Consumers showed last week the lowest figure in four months, standing at 48.1, compared to 51.7 in August and 55.1 last September. It is a 7% and 12.7% drop for the month and the year, respectively.
Joanne Hsu, the survey director, noted that the latest figure is down 15% compared to January. "Views of current and year-ahead expected personal finances both weakened about 10% this month, with concerns over high prices continuing to climb," Hsu said.
