U.S. PCE price index rises 0.5% in September, fastest pace since May

Key Facts

The U.S. personal consumption expenditures price index rose 0.5% in September, compared with a 0.3% increase in August, marking its highest monthly reading since May, according to the Associated Press. The reading puts consumer prices in the spotlight seven days before the midterm elections, as the campaign focuses on the cost of living. The Federal Reserve closely tracks the PCE index because it gives less weight to housing prices and allows consumer shopping patterns to change. The price increase coincided with a slowdown in real consumer spending, from growth of 0.5% in August to 0.0% in September, according to data from the Bureau of Economic Analysis. Real disposable income also fell 0.3% in September, after remaining unchanged in August. The figures highlight price pressures on purchasing power, despite the increase in spending in current dollars.

Consumer spending in current dollars rose by $113.1 billion, or 0.5%, in September, according to the Bureau of Economic Analysis. Services spending increased by $78.1 billion, compared with $35.1 billion for goods, making services the largest contributor to the nominal increase. But after-tax disposable income rose by $52.7 billion, or 0.2%, while personal income increased by $54.5 billion, or 0.2%. Personal saving was $911.1 billion, equivalent to a saving rate of 3.8% of disposable income. The bureau attributed the income increase mainly to compensation and government social benefits. Private wages and salaries led the rise in compensation, while Medicare was the largest driver of the increase in government benefits.

The indicators reflect a divergence between strength in overall economic activity and subdued monthly real spending. Real gross domestic product grew at an annual rate of 3.4% in the third quarter, after 2.2% in the second quarter, according to the Bureau of Economic Analysis' advance estimate. Investment, consumer spending and government spending contributed to third-quarter growth, while a decline in exports offset part of the increase. In the GDP accounts, the PCE price index rose at an annual rate of 2.1% in the third quarter, compared with 5.0% in the second quarter. The core index, which excludes food and energy, rose 2.5%, versus 3.3% in the previous quarter. These quarterly readings show a slowdown in price measures within the GDP accounts, alongside the halt in real spending growth in September.

On October 28, the Federal Reserve kept its target interest-rate range at 3.75% to 4%, with the decision passing by a vote of 10 to 2. Lisa Cook and Beth Hammack preferred to raise the range by a quarter of a percentage point. The central bank said that “inflation remains elevated,” adding that the accumulation of more information would help the committee determine the appropriate policy stance to ensure inflation returns to its 2% target in a timely manner. The Fed statement also said economic activity was expanding “at a solid pace.” The Associated Press said continued above-target inflation and a strong economy would keep the Fed under pressure to raise rates at its next meeting in December. The committee is scheduled to meet on December 8 and 9, with the news conference to be held on the ninth.

Personal income and outlays data for October will be released on November 25, 2026, at 8:30 a.m. Eastern time, according to the Bureau of Economic Analysis. The reading will come before the Fed's scheduled meeting on December 8 and 9. The forthcoming data include updates on income, spending and price measures, according to the official release schedule. The comparison with September is significant in light of the halt in real spending growth during the month and the decline in real disposable income. The release also follows October's decision to leave rates unchanged, with the committee signaling the importance of new information in determining its policy stance. The committee's next meeting will be in December, after the October data are released.