What is PCE — Personal Consumption Expenditures Price Index?
The Personal Consumption Expenditures (PCE) price index measures price change across all goods and services bought by U.S. households, published monthly by the Bureau of Economic Analysis. PCE is the Federal Reserve's preferred inflation gauge — the 2% inflation target is defined in terms of PCE, not CPI.
Live data: Personal Consumption Expenditures: Chain-type Price Index
Federal Reserve Economic Data (FRED) — · Monthly · 146 observations
Most recent observation: 129.45 Index 2017=100 as of February 1, 2026.
Understanding PCE
PCE measures price change for the entire basket of goods and services U.S. households consume, including purchases made on their behalf by employers (notably health insurance) and by federal and state programs (Medicare, Medicaid). This broader scope makes PCE roughly 60% larger than CPI in dollar terms and accounts for most of the methodological differences between the two indexes.
The Bureau of Economic Analysis publishes PCE monthly as part of the Personal Income and Outlays release, two to three weeks after the CPI release. Because PCE covers the same month CPI already reported, economists can usually predict it accurately from the CPI release plus the known weight differences — but the Fed still tracks the PCE release closely because it is the official 2% target metric.
PCE's chain-weighted formula lets the basket rotate as consumers substitute toward cheaper alternatives, which tends to make PCE rise more slowly than CPI's fixed-weight index during periods of relative price change.
How PCE is calculated
PCE aggregates monthly spending data from dozens of source surveys using a chain-weighted (Fisher ideal) index formula. Weights update continuously as consumer spending patterns shift. Roughly 25% of the PCE index uses CPI data as an input; the rest draws from producer price data, other surveys, and imputed measures for goods and services not captured in CPI (notably services provided by nonprofits and the financial sector).
Historical context
PCE inflation has been tracked since 1929. The Fed formally adopted a 2% PCE inflation target in January 2012, after years of treating it as the preferred gauge informally. Before that, the 'unofficial' target had been stated as 2% CPI inflation. PCE's 2021–22 peak of 7.1% (headline) and 5.6% (core) coincided with the sharpest inflation episode since the early 1980s.
Frequently asked questions
Why is PCE the Fed's preferred inflation measure?
The FOMC cited three reasons when formally adopting PCE: broader scope (it covers all household consumption, not just out-of-pocket), more responsive weights (updated continuously), and a formula that better accounts for consumer substitution. Together these make PCE a more complete measure of price change facing U.S. households.
Does PCE always run lower than CPI?
Usually, but not always. Over the last 30 years PCE has averaged 0.25–0.5 percentage points below CPI. In some months that gap narrows or reverses, especially when healthcare (overweighted in PCE) or shelter (overweighted in CPI) moves sharply.