PCE Price Index YoY

The PCE Price Index YoY (change from 1 year earlier) tracks inflation over 12 months in US consumption spending. The Bureau of Economic Analysis publishes it in the National Income and Product Accounts as its consumption price gauge. It covers goods and services bought by persons resident in the United States, including households plus nonprofits and care paid by others.

It includes personnel abroad and residents travelling for 1 year or less, plus mostly new goods and services from private business. It differs from the Consumer Price Index, which measures out of pocket household spending with fixed weights. The Federal Reserve uses 2% yearly PCE inflation as its longer run goal for stable prices.

The index arrives monthly in the Personal Income and Outlays report at 8:30 AM Eastern, about 1 month after the reference month. The reference period is the calendar month, with dollar values shown at seasonally adjusted annual rates (SAAR). Each release publishes income, spending, saving, detailed price tables and market based cuts with observable prices.

It revises earlier months as source data arrive and publishes revision tables with full history. An annual update revises several prior years, while benchmark revisions every few years reclassify methods and reset reference year.

Year over year change moves with goods, services and volatile food and energy cuts.

• Durable goods: durable goods with life of 3 years or more, like vehicles, furnishings, recreational goods and other durables.
• Nondurable goods: nondurable goods with life under 3 years, like off premises food, clothing, gasoline and other nondurables.
• Services: services that cannot be stored and are consumed at purchase, like housing, utilities, health care, transport, recreation, food services, finance and other services.
• Food: food only covers food and beverages bought for off premises use, not restaurant and lodging services.
• Energy: energy covers gasoline and other energy goods plus electricity and gas utilities.
• Core: core means headline without food and energy and reveals the underlying inflation trend.

Goods often swing more than services, while food and energy swing most. Core tracks the slower trend when volatile parts lift or drag the headline.

1. Build nominal spending: build nominal spending by adding price times quantity across detailed categories for the month.
2. Build detailed prices: build detailed prices by extending consumer and producer indexes, scaled to 100 in the reference year.
3. Deflate to real quantities: deflate to real quantities by dividing each nominal line by its price index, using quantity extrapolation or direct valuation where needed.
4. Aggregate with Fisher links: aggregate with a Fisher ideal index, the geometric mean of Laspeyres with base weights and Paasche with current weights.
5. Chain and compare: chain links into a level with 100 in the reference year, where YoY equals 100 times the 12 month ratio minus 1.
6. Adjust seasonally: adjust seasonally using source seasonal data or concurrent factors, aggregate adjusted detail and show dollars at SAAR.

A toy example makes the chain clear. A Fisher link of 1.05628 turns a level of 120.000 into 126.753 and YoY against 122.000 is 3.90%.