A key inflation metric preferred by the Federal Reserve jumped higher than anticipated in August. The personal consumption expenditures price index excluding food and energy rose by 0.6% last month, slightly above the 0.5% estimate.
Over the last year, the core PCE has increased by 4.9%, well above the Fed's 2% target.
Consumer spending also increased in August, with spending on services jumping by 0.8%. Meanwhile, spending on goods was down by 0.5%, in part due to lower gas prices.
Economists also noted that recent interest rate hikes from the Federal Reserve to tamp down on the soaring inflation have caused demand to drop.
"The latest data are pointing to a loss of momentum in household spending," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, told Reuters. "With further rate hikes in the pipeline, risks to both consumption and growth remain to the downside."
The Federal Reserve is expected to continue to hike interest rates in the coming months.
"Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target," Federal Reserve Vice Chair Lael Brainard said in a speech on Friday. "For these reasons, we are committed to avoiding pulling back prematurely."