The PCE inflation, or Personal Consumption Expenditures inflation, is a measure of inflation that tracks changes in the cost of living for households in the United States. It is constructed and reported by the Bureau of Economic Analysis (BEA) and is a key component of the PCE Price Index (PCEPI), which is used by the Federal Reserve to measure inflation. The PCEPI measures the prices consumers pay for goods and services and changes in those prices, and it is considered a gauge of inflation in the U.S. economy.
The PCE measures the actual and imputed expenditures of households on durable and non-durable goods and services, and it is essentially a measure of goods and services targeted towards individuals and consumed by individuals. It is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior. The PCE inflation rate is calculated by adding up the dollar amounts of all goods and services in a basket of goods and services, comparing the total to the prior month’s figures.
The PCE inflation is important because it can affect decisions about business offerings, hiring, and investments. Economists and analysts use PCE to make projections about future spending and economic growth, and it gives companies insight into their business needs concerning products and services. The PCEPI provides two figures: the headline PCEPI, which includes all goods and services, and the core PCEPI, which excludes prices for food and energy. The core PCEPI is sometimes called the core PCE price index because two categories that can have price swings – food and energy – are left out to make underlying inflation more visible.
In summary, the PCE inflation is a measure of inflation that tracks changes in the cost of living for households in the United States. It is constructed and reported by the Bureau of Economic Analysis and is a key component of the PCE Price Index, which is used by the Federal Reserve to measure inflation. The PCE measures the actual and imputed expenditures of households on durable and non-durable goods and services, and it is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.
