US PCE inflation rate hits three-year high as Iran war pushes up prices – as it happened
US PCE inflation rate hits three-year high
A key measure of US inflation has hit its highest level in three years.
Higher energy prices amid the war with Iran drove up costs for US consumers in April, according to the personal consumption expenditures price index.
The US PCE index rose by 3.8% in the 12 months through April, the largest rise since May 2023, up from 3.5% in March.
Energy costs saw the biggest increase in April, but prices also rose in other spending categories too.
The core PCE index, which strips out food and energy, rose by 3.3% year-on-year in April after rising 3.2% in March.
PCE is the US central bank’s favoured inflation measure, as it tries to keep rises in the cost of living at around 2% a year. High and rising inflation will make it rather harder for the Federal Reserve to lower interest rates.
Scott Helfstein, head of investment strategy at Global X ETFs, says:
“The hotter inflation report is not a surprise. The market has already shifted expectations on interest rates 180 degrees this year from cuts to hikes. So, this inflation report should be baked into asset prices. This is good news. Investors can focus on fundamentals and the real economy rather than trying to game Fed moves.”
Key events
Closing post
Time to wrap up…
The Iran war is continuing to push up prices, hitting Americans in the pocket, while Britain has been warned it risks creating a ‘lost generation’ of young people.
The US personal consumption expenditures price index rose 3.8% from a year earlier, the biggest monthly rise since 2023, driven by higher energy costs.
The US economy also grew slower than first thought at the start of the year – GDP expanded at a rate of 1.6% per year, down from 2% first estimated.
Oil has dropped back from its earlier highs, after reports that the United States and Iran have reached an outline agreement to extend their ceasefire, subject to the approval of President Donald Trump.
Britain risks a financial hit worth £125bn a year from a worsening crisis in youth worklessness after a rise in the number of young people not in employment or education to more than 1 million.
In a landmark government-backed report, Alan Milburn warned that Britain’s economy and the public finances were losing billions of pounds a year amid the growing risk of a “lost generation” of young people.
The former Labour cabinet minister said youth disengagement was a mounting economic risk to the country, as he urged the government to undertake a fundamental reset of policy covering schools, the health service and the welfare state.
The warning came as the number of ‘neets’ hit one million for the first time in over a decade.
Oil drops back
It’s another rollercoaster day for the oil price.
Having been up 2% earlier, Brent crude has sunk back to $94.50, only slightly above where it began the day, after Axios reported that the US and Iran have reached an agreement on a 60-day memorandum of understanding to extend thei ceasefire and launch negotiations on Iran’s nuclear program.
Wall Street has now turned positive, on a new report that the US and Iran are inching towards a breakthough.
Axios are reporting that US and Iranian negotiators have reached an agreement on a 60-day memorandum of understanding to extend the ceasefire and launch negotiations on Iran’s nuclear program.
However, President Trump has yet to give it his final approval, they add….
Johnson Matthey makes £340 takeover bet on AI data centre boom
Jasper Jolly
British chemicals company Johnson Matthey may spend as much as £340m on a takeover in a bet on a US business benefiting from the AI data centre boom.
The FTSE 250 company will pay $360m plus another possible $100m to buy Cormetech, which makes materials for catalytic converters used to clean the fumes created by fossil fuel generators attached to data centres.
The surge in global demand for data centres is being led by so-called hyperscalers like Amazon, Microsoft, Google owner Alphabet and Facebook owner Meta. Their investments are putting huge pressure on energy supplies, with big tech companies sidelining previous efforts to cut carbon emissions and installing generators to power the racks of computer chips. At the same time, Donald Trump’s administration has actively opposed the development of renewable energy supplies.
The consequent expansion in demand for generators has already helped Johnson Matthey, an expert in the platinum group metals used in converters that reduce harmful pollutants. However, the British company’s focus is on diesel generators that are mainly used for back-up power, while Cormetech works on gas turbines that are used as the main power source for many data centres.
Liam Condon, Johnson Matthey’s chief executive, said the data centre boom offered a “very sustainable growth trajectory for the simple reason that demand far outweighs supplies. You can’t actually get enough gas turbines quick enough.”
“For the hyperscalers it’s a bit of a life or death race. If they don’t have enough energy it’s kind of game over. The energy demand is insatiable.”
Some analysts have questioned whether the boom is sustainable, but Condon said that even under “very prudent” forecasts, there was still far more demand than supply.
Johnson Matthey has also benefited from the slower than expected shift away from petrol and diesel engines, which require its catalytic converters to meet emissions regulations. Condon is leading an effort to increase the profitability of that business even as it shrinks by cutting costs and closing manufacturing. The unit increased its profit margins by 2.7 percentage points in the year to 31 March, to 14.5% before one-off costs. The business is aiming for profit margins of between 16% to 18% in the 2027/28 financial year.
There’s a muted start to trading on Wall Street.
With tensions between the US and Iran intensifying, the S&P 500 share index has dipped by five points, or 0.075%, to 7,514.61 points.
The narrower Dow Jones Industrial Average has lost 75 points, or 0.15%, to 50,569 points.
The jump in the US PCE inflation measure to its highest since 2023 shows that Americans are being squeezed financially, reports Heather Long, chief economist at Navy Federal Credit Union.
“Inflation is at a three-year high and personal savings has cratered to one of the lowest levels in the past 20 years. Many Americans are spending more than the income they have coming in. This is not sustainable, especially for lower-income and middle-class households.”
[And the midterms are coming up….]
US PCE inflation rate hits three-year high
A key measure of US inflation has hit its highest level in three years.
Higher energy prices amid the war with Iran drove up costs for US consumers in April, according to the personal consumption expenditures price index.
The US PCE index rose by 3.8% in the 12 months through April, the largest rise since May 2023, up from 3.5% in March.
Energy costs saw the biggest increase in April, but prices also rose in other spending categories too.
The core PCE index, which strips out food and energy, rose by 3.3% year-on-year in April after rising 3.2% in March.
PCE is the US central bank’s favoured inflation measure, as it tries to keep rises in the cost of living at around 2% a year. High and rising inflation will make it rather harder for the Federal Reserve to lower interest rates.
Scott Helfstein, head of investment strategy at Global X ETFs, says:
“The hotter inflation report is not a surprise. The market has already shifted expectations on interest rates 180 degrees this year from cuts to hikes. So, this inflation report should be baked into asset prices. This is good news. Investors can focus on fundamentals and the real economy rather than trying to game Fed moves.”
Oil back towards $100….
The oil price is risen today, as hostilities between the US and Iran heat up again.
Brent crude has gained almost 2% to over $96 a barrel.
Traders have noted that the US carried out new strikes inside Iran, targeting a military facility and downing Iranian attack drones, prompted the Iranian retaliatory attack on an American airbase in Kuwait.
Markets dip amid Middle East hostilities
Global financial markets are in retreat again today, as tensions in the Middle East rise.
The UK stock market has dropped, with the FTSE 100 share index currently down 0.9% or 91 points at 10,414 points.
Renewed US-Iran hostilities are clouding the prospects for reopening the strait of Hormuz, putting investor optimism over the crisis under pressure.
Weapons producer BAE Systems (+1.3%), and oil producers Shell (+0.7%) and BP (+0.4%), are among the risers.
This comes after Kuwait named Iran as the culprit behind attempted missile and drone attacks against the Gulf state, after the US targeted a military facility in Iran and downed four attack drones.
US Central Command forces shot down four Iranian one-way attack drones that posed a threat around the Hormuz strait, according to the officials, and struck a ground control station in the port city of Bandar Abbas that was about to launch a fifth drone. Iranian state broadcaster Irib reported later on Thursday the Revolutionary Guards had targeted an American base in Kuwait “that served as the source of the attack”.
Israel’s IDF has confirmed it carried out “a targeted strike in Beirut”, while local media in Lebanon have also reported that at least a dozen people have been killed in Israeli attacks on the south of the country.
European markets are also dropping, with Germany’s DAX and France’s CAC share indices both off 0.5%.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, reports that markets are in a ‘fragile mood’:
The issue for investors is that markets have started to price in the Middle East conflict being largely contained, which means positive headlines now have less power to lift sentiment, while any setback can quickly take the shine off.
Hopes yesterday around the reopening of the Strait of Hormuz offered some relief, but renewed hostilities and fresh uncertainty over key sticking points, including shipping traffic and the nuclear programme, have brought caution back to the fore.
US growth revised down
Elsewhere in the world economy today, the US didn’t grow as fast as first estimated in January-March.
US GDP rose at an annualised rate of 1.6% in Q1 2026, new data from the Bureau of Economic Analysis shows, the equivalent of a 0.4% rise in the quarter.
That’s down from an initial estimate of 2% annualised growth.
The BEA says it has revised down its estimates of investment and consumer spending in the last quarter.
This still shows a pick-up compared to the end of last year, thanks to upturns in government spending and exports.
TUC blasts “cynical attempts” to blame workers’ rights laws for Neets crisis
TUC General Secretary Paul Nowak is urging the government to ignore “cynical attempts to blame new workers’ rights laws” for the rise in Neets.
Pushing back against criticism of the youth minimum wage, Nowak says:
Young people pay the same bills as everyone else and deserve a fair wage for their work.
“Youth rates are not only unfair, but they’re also increasingly obsolete as most businesses hardly use them.
“Cutting the minimum wage for young workers is not the way to get – or retain – them in the jobs market.
“The independent experts at the Low Pay Commission have said employment for young people has done better where minimum wage coverage is highest – and shown that successive governments have closed the gap between the adult rate and youth rate with no negative impact on employment.”
Milburn has explained why the Netherlands has such a low Neets rate (5.3%), while the UK’s is almost three times higher, telling reporters:
First of all, it’s about the question that you ask, which is they make a priority of vocational education and investment in it. And when you look at the numbers, there’s a far higher proportion of Dutch kids, Dutch young people, in the equivalent of our FE colleges than there are here. So they’ve made a deliberate choice and it’s produced a pretty good outcome.
Secondly, they approach things in different structural way. So one of the very striking features of the Dutch system, for example, is it’s much more integrated. The services pull together. Ours is fractured. They’re integrated. They’re pulled together.
There’s one data set. Critically there’s one organisation responsible. We have no one responsible here because everyone is.
And the final part of the action that they seem to get right, that we get wrong, is that employers are much more engaged from the outset with the education system, so that kids are getting familiarity with employers, with the world of work, with work experience, with all of those things that we know that employers are crying out for.
Our Politics Live blog has more details:
Lizzie Crowley, senior skills adviser at the HR body CIPD, says the government should suppor a new Apprenticeship Guarantee for all 16-24 year olds, to help younger people get opportunities.
“Young people are desperate for an opportunity to prove themselves, but many are struggling to navigate a labour market where entry-level opportunities, work experience and structured progression routes have become harder to access.
“Today’s Milburn Review findings and ONS figures highlight that much bolder action is needed to support youth employment given the collapse in the number of apprenticeships for 16-24 year olds and the general reduction in entry level roles.
UK risks £125bn hit a year from youth unemployment, landmark report says
Richard Partington
Britain risks a financial hit worth £125bn a year from a worsening crisis in youth worklessness after a rise in the number of young people not in employment or education to more than 1 million.
In his landmark government-backed report, Alan Milburn warned that Britain’s economy and the public finances were losing billions of pounds a year amid the growing risk of a “lost generation” of young people.
Firms blame rising labour costs
UK businesses are blaming the government for raising employment costs, fuelling the Neets crisis.
Helen Dickinson, chief executive of the British Retail Consortium, says the retail industry has shed almost 400,000 jobs in the last decade, meaning fewer opportunities for young people.
Dickinson points to the tax rises in Rachel Reeves first budget, saying:
“The patchwork of support for jobseekers and employers is complex and often misaligned. Interventions like the Youth Jobs Grant and Jobs Guarantee are welcome but are held back by the massive rise in employment costs and regulations faced by businesses.
In April 2025, the cost of employing someone in a full-time entry level job rose by 10%, and part-time an additional 13%. Implementation of aspects of the Employment Rights Act risk limiting more entry level jobs. Government must join the dots between tax, red tape, and its efforts to reduce unemployment.
Allen Simpson, chief executive of UKHospitality, also blames the rise in employers’ national insurance rates (NICs):
“This interim report is clear sighted analysis of how significantly increasing employment costs directly reduces job opportunities, particularly for young people.
“The rapid loss of around 100,000 hospitality jobs after the 2024 Budget and the increase to employer NICs was the canary in the coal mine and should have been recognised as such by the Government.
“The solution is to reduce the cost of employment for hospitality businesses. As the biggest youth employer and driver of social mobility, thousands of job opportunities can be unlocked as a result. The Government needs to make it economically beneficial to employ young people once again.
Milburn: Employers are ‘absolutely critical’ for fixing youth unemployment crisis
It is vital that UK employers create more job opportunities for young people, Alan Milburn tells reporters.
Milburn (born in 1958) says his generation grew up with the idea that you’d walk into work, perhaps starting with a Saturday job.
He also reveals he was sacked from an early stint as a paperboy in Newcastle for not getting out of bed.
He says:
Employers are absolutely critical to this. unless we can generate more opportunities for young people we’re really not fixing the generational crisis.
