Fed’s favorite inflation gauge spikes, consumer spending holds up solidly.

Consumer spending on goods and services – which includes anything from toys to rent and which accounts for over two-thirds of GDP – rose by 4.4% in March from a year ago, according to the Bureau of Economic Analysis this morning. This growth rate is in the upper third of the range of the past few years. Solid but not spectacular comes to mind.

In terms of dollars, the seasonally adjusted annual rate in March (which shows what the total amount of consumer spending would be for the entire year at the rate March was going) reached a record of $13.82 trillion, and remains on the same trajectory of the past few years. The seasonally adjusted annual rate in March is 36% above the mini-peak in July 2008:

But these numbers of consumer-spending growth do not include the impact of inflation, and inflation is stirring.

The BEA also released the PCE price index this morning – the Fed’s favorite inflation measure because it usually tracks lower than the Consumer Price Index and thus further understates the deterioration of the purchasing power of the dollar as consumers experience it. The PCE price index rose by 2.0% from a year ago, which is right smack-dab on the Fed’s target. And it’s up from 1.7% in February. Note that the Fed’s target of 2% inflation isn’t a minimum, but a target.

The Fed is even more focused on the PCE price index without food and energy – not because food and energy are not important to consumers, but because their prices can gyrate wildly. And this core PCE price index jumped by 1.9% from a year ago. Up from an increase of 1.6% in...

Read more from our friends at Gold & Silver