Inflation in the US remained mired uncomfortably below target as personal consumption expenditures (PCE) – the Federal Reserve's preferred measure of price growth – stalled in July.
Although the data revealed accelerating growth in personal income and real disposable income from the low levels seen in June, month-on-month growth in PCE was not high enough to register movement in the annual pace of PCE inflation.
Personal consumption expenditures
The month-on-month rise in PCE at 0.1% primarily reflected increases in wages and personal income receipts on assets, the Bureau of Economic Analysis said.
This small monthly gain failed to register a move on the annualised PCE price index. The headline index for July remained at June's level of 1.4%.
Core PCE, which excludes volatile food and energy prices, slipped to 1.4% in July from 1.5% in June.
Offsetting the rise in wages and other income was an increase in personal outlays and increased rates of saving.
Fed policy settings
While the Federal Reserve was likely to welcome the 0.4% rise in personal income, the core rate of annual PCE inflation at 1.4% remained substantially below the its target rate of 2%.
Ian Shepherdson at Pantheon Macroeconomics believed, however, that the data contained elements that would please the Fed.
He said: "The consumption trend is solid. While we expect some post-Hurricane Harvey slowing, we then expect to see a rebound."
The dollar continued its rally on Thursday, although it came off its highs following the inflation data.
The dollar index, a measure of the greenback's relative strength against a basket of rival currencies, was up 0.2% at 93.07, coming off a daily high of 93.35.
Against the euro, the dollar remained 0.2% higher at $1.1855 and was up 0.3% against the pound at $1.2881.
Stocks were buoyed by the prospect that US rates could be held at the Fed's September meeting.
The Dow gained 0.4% in opening moves on Wall Street, while the S&P 500 added 0.5%.