The Personal Consumption Expenditures Price Index (PCEPI): A Comprehensive Guide

What is the Personal Consumption Expenditures Price Index (PCEPI)?

The Personal Consumption Expenditures Price Index (PCEPI) is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services.

Importance of the PCEPI

The PCEPI is the method used by the Federal Reserve to measure inflation. As such, its figures can greatly impact decisions about business offerings.

Measuring Inflation

The PCE price index gauges US inflation by measuring changes in the cost of living for households. It does this by tracking price changes of a basket of goods and services consumed.

Broad Inflation Measure

PCE is a broader inflation measure, accounting for changes in consumer behavior. For example, it takes into account when consumers substitute products when prices rise.

Historical Tracking

The PCE index has been recorded since January 1959. Through July 2018, PCE inflation averaged 3.3%, compared to 3.8% using CPI.

Conclusion

The PCEPI is a critical economic indicator that provides insights into inflation trends and consumer spending patterns. By understanding this index, individuals and businesses can better navigate the complexities of the US economy.