What Is PCE (Personal Consumption Expenditures)?

What is PCE? Personal Consumption Expenditures is the US inflation measure the Federal Reserve sets its 2% goal on. It tracks the prices that people living in the United States, or others buying on their behalf, pay for goods and services (BEA).

If you trade the dollar, this is the number the Fed is actually judged on. The Fed wrote the goal down in January 2012 and reaffirmed it in January 2026: inflation of 2 percent, “as measured by the annual change in the price index for personal consumption expenditures” (Statement on Longer-Run Goals). It prefers PCE largely because it covers a wide range of household spending (Federal Reserve FAQ).

Late, and mostly known in advance

The Bureau of Economic Analysis (BEA) publishes PCE in its Personal Income and Outlays report, at 8:30 a.m. New York time near the end of the month. Some months it lands on the same morning as a GDP estimate, so the dollar has two reports to digest at once. Dates are on the BEA’s release schedule and on When is the next PCE report?

By then the CPI for the same month has been out for about two weeks. June 2022 is a typical gap: the CPI came out on 13 July, PCE on 29 July.

Those two weeks matter because PCE borrows its prices. For most of its categories the BEA uses a consumer price index from the BLS, and for some services, such as doctors, hospitals and air travel, a producer price index (BEA NIPA Handbook). Once CPI and PPI are out, economists can work out most of PCE before it is published. That usually leaves it less room to surprise than CPI, which arrives cold.

The forecast and the recent results against it are on US PCE Price Index. The same report also gives consumer spending itself; an earlier monthly read on part of that spending is in What Is Retail Sales?

Headline and core PCE

Headline PCE covers everything. Core PCE leaves out food and energy, whose prices swing up and down more sharply and more often than the rest (BEA). The goal stays on headline, and core is the guide to where it is heading. More in What Is Core Inflation?

Why PCE moves the dollar

A central bank sets interest rates to keep inflation near its goal, and PCE is the measure the Fed’s goal is written on. A reading above the forecast makes higher US rates, or fewer cuts, more likely, and that tends to support the dollar. Below the forecast works the other way. As with any release, the gap to the forecast moves the price, not the level.

Why PCE and CPI give different numbers

Same month, different answer. In June 2022 US inflation was 9.1% on the CPI (BLS) and 6.8% on PCE (BEA, June 2022). Core was 5.9% against 4.8%.

The BEA puts most of the gap down to three effects, with a small remainder it calls other effects (BEA FAQ):

• Formula. PCE uses a Fisher-Ideal formula, the CPI a modified Laspeyres formula.
• Weights. The two give the same items different shares. Housing is the big one. In the BEA’s worked example, the third quarter of 2006, the CPI rose at a 3.7% annual rate and PCE at 3.0%, and the weight of homeowners’ imputed rent alone accounted for 0.56 of that 0.7-point gap.
• Scope. PCE also counts what is paid on households’ behalf, which the CPI’s out-of-pocket view leaves out. Hospital and nursing home services are the BEA’s example.

How wide is the gap in a normal month? Over the 319 months from January 2000 to August 2026, the 12-month CPI rate ran on average 0.36 points above PCE, and core CPI 0.29 points above core PCE. CPI was more than half a point higher in 27% of those months. PCE was the higher of the two in only 13%. The widest headline gap was June 2022, at 1.9 points on today’s figures: PCE for that month has since been revised to 7.2% from the 6.8% first published.

Those figures compare the 12-month rates of the CPI and the PCE price index, and of their core versions (BLS and BEA data on FRED), each rounded to one decimal as the agencies print it, and use PCE as revised, not as first published.

So do not compare a CPI figure with the Fed’s 2%. The goal is on PCE, and PCE can sit well below CPI for the same month.