January PCE rises 0.6%; Biden says economy improving despite 'setbacks'

Feb. 24 (UPI) -- The latest increase in prices for the U.S. consumer shows there's clearly more work to do to control inflation, the White House said Friday.

Data from the Commerce Department showed that personal income increased to $131.1 billion in January, a 0.6% improvement over December levels. The price that consumers pay for goods and services, however, also increased by 0.6% from December levels.

So-called core consumer inflation, which strips out the more volatile prices of energy and food, increased by 0.1% from December levels to 6.5% last month, sharply lower than summer levels near 9%, but far below the 2% target rate for policy makers at the U.S. Federal Reserve.

President Joe Biden said Friday that data show there's been clear progress made on lowering inflation, but more work is necessary

"As I've long said, there may be setbacks along the way, but we face global economic challenges from a position of strength," he said.

Despite the economic improvements, Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said Friday that "very high inflation" has been a common theme for the better part of two years.

"Incoming economic information shows that our monetary policy actions are having the intended effect of slowing demand and reducing price pressures. In addition, supply chain disruptions are easing," she said. "But inflation remains too high."

That could incentivize another rate hike of 50 basis points, or 0.5%, from the Federal Reserve. That's above the first 25 basis point increase for this year, but lower than the 75 basis point hikes that prevailed throughout 2022.

Fed policymakers are walking a tightrope with rate hikes as too-high lending rates could slow the economy to the point of recession. The Commerce Department reported Thursday that gross domestic product increased at an annual rate of 2.7% during the fourth quarter, slower than the 3.2% growth recorded during the three-month period ending in September.

Very few major economies are showing signs of dramatic improvement. The Organization for Economic Cooperation and Development on Tuesday said economic growth for member states moderated in the fourth quarter.

A true recession would see a decline in hiring. Though the tech sector is trimming payrolls, hiring in general has been resilient.

Markets turned sharply negative in early Friday trading. The Dow was down 1.45%, the S&P 500 was down 1.5% and the tech-heavy NASDAQ was off 2.1% as of 10:45 a.m. EST.