US inflation accelerated in September, and the economy grew faster than expected in the third quarter. The personal consumption expenditures price index rose a seasonally adjusted 0.5% on the month, the largest rise since March and in line with the Dow Jones consensus, CNBC reported. The annual rate was 3.6%, a tenth of a point under the consensus and still well above the Federal Reserve's 2% goal. Core PCE, which leaves out food and energy, rose 0.3% on the month and 3.1% on the year, both in line. Gross domestic product grew at a 3.4% annual pace, above the 3.1% estimate and up from 2.2% in the second quarter. The prints landed a day after the Fed held rates at 3.75% to 4% in the 10-2 vote.
The hot month was energy. The quarter was cooler.
Gasoline and other energy goods jumped 9.2% in September. Energy goods and services together rose 5.4%. Services prices excluding energy and housing rose 0.4%, and housing rose 0.3%. Consumer spending increased 0.5%, a little under forecasts. Personal income rose 0.2%. The quarter tells a different inflation story from the month. Quarterly PCE prices rose 2.1% on the headline measure and 2.5% on core, down from 5% and 3.3% in the second quarter. Growth was supported by investment and consumer spending. Saxo said weekly jobless claims fell to 194,000, a low-layoff labour market sitting next to unfinished inflation.
Yields fell even as a December hike stayed likely
A hot annual PCE did not push bond yields up on Friday morning. Saxo said the 10-year yield fell more than 7 basis points to around 4.9%, and the two-year fell more than 8 basis points to about 4.6%, as a tech selloff and the Binance breach hit risk appetite. The 10-year's October drop is about 37 basis points, the largest monthly fall since December 2023. CME FedWatch, on the Reuters reading carried with Friday's gold story, priced a December hike near 75%, down from about 80% after Wednesday's hold. The Nasdaq 100 fell 1.4% on Thursday to around 29,400. The S&P 500 and the Dow each slipped 0.3%, to about 7,720 and 52,340. Alphabet fell about 13% and lost roughly $500 billion of market value. The Bank of Japan left rates unchanged on Friday and kept a December hike in view. The ECB held on Thursday. Chair Christine Lagarde said she will leave on 7 February 2027, earlier than planned. Gold's slip under $4,000 is in the commodities update. Bitcoin's six-week low is in the market lead. More rates coverage is on the economy desk.