CNBC's Rick Santelli joins 'Squawk Box' to break down the July PCE report.

The core Personal Consumption Expenditures (PCE) inflation rate rose to 2.9% in July, as anticipated by analysts. This figure is slightly higher than the previous month's 2.8% and is in line with rates seen earlier in the year. Other economic data released at the same time showed personal income up by 0.4% and personal spending up by 0.5%, both matching forecasts. The overall trade deficit widened more than expected, reaching $103 billion, while wholesale and retail inventories both increased by 0.2%. Bond yields showed little change in response to the data, with minor fluctuations noted in two-year and ten-year Treasury yields.

Core inflation rate rose to 2.9% in July, as expected

We want to get over to the PCE report, which is going to be out in just seconds. I want to get straight over to Rick Santelli standing by at the CME. Rick. Yes, we are awaiting the July read on income and spending and all the Fed's favorite inflation metrics. And they are populating on the wire as we speak. Personal income up exactly as expected, up four-tenths. Up four-tenths would be the best since up eight-tenths in April. Up half a percent in spending, very solid, and very much as expected. Up half a percent, best since March when it was up 0.7. If we look at real spending, accounting for inflation, once again, nice strong number, exactly as expected, up three-tenths. This follows up one-tenth and it is the best since March of this year. If we look at the PCE on a month-over-month basis, exactly as expected, up two-tenths. Up two-tenths equals where we were in May. To find a lower number, you're going back towards March when it was zero. So we are making definite progress there with respect to the PCE on a month-over-month. If we take a year-over-year perspective, 2.6, left and right, it's exactly as in the rearview mirror, it's exactly as expected. If we look at the month-over-month on a core basis, up three-tenths, once again, exactly as expected, exactly as the rearview mirror. And finally, what I would consider the most important number on the seven variables within this income and spending, that would be the core PCE year-over-year. Comes in at 2.9, as expected, but this is the only number on the inflation front that's a little warmer than it was last month. It was 2.8, now at 2.9. 2.9 would be in line with the 2.94 that we had in February, or the 2.97 we had in March of last year. Now let's look at the trade balance, shall we? We're expecting $90.2 billion with a negative, that's a red, a minus sign. Comes in worse than expected, minus $103 billion, and that would comp to the biggest deficit ever in March, and that was minus $161 billion, and that was the biggest since record-keeping in 1989, so we are moving the wrong way there. Wholesale inventories up two-tenths, that's a July preliminary number. Retail inventories, a July number, up two-tenths. How did all this get digested by the marketplace? Well, prior to the release of the numbers, a two-year was at $364, it's now at $363. It closed at $370 last Friday. If we look at a 10-year, it's currently at $421, it was at $422. $421 is exactly unchanged versus yesterday's late cash market close. However, we did close at $426 last Friday, so we are lower in yields, not a lot, but about a handful as we sit right now with last Friday's close. We're turning a bit higher. Yesterday's low yield in tens was right around $420. We held that today. That's very critical, and if you're a technician out there, watch four and a quarter in deference to the close. Gang at the desk, back to you.

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Breakdown