PCE

PCE, or Personal Consumption Expenditures, is a measure of household spending on goods and services in the United States. In the national accounts compiled by the Bureau of Economic Analysis (BEA), PCE represents the value of expenditures by residents for durable goods (such as cars and appliances), nondurable goods (such as food and clothing), and services. It includes expenditures financed by households and by nonprofit institutions serving households, and it incorporates the imputed value of housing services provided to homeowners. It excludes expenditures by government and gross investment.

PCE is a major component of GDP by the expenditure approach, typically the largest contributor to GDP growth. Real PCE is adjusted for price changes, giving a measure of consumption growth in volume terms. PCE is typically reported in nominal terms; the components are further broken down into durable goods, nondurable goods, and services, with services representing the largest share.

The BEA also publishes the PCE price index, an inflation measure used to convert nominal PCE to real terms. A core version of the index excludes food and energy to provide a more stable signal of inflation. The Federal Reserve regards the core PCE price index as its preferred measure of inflation for policy decisions, because it better reflects persistent price changes in household consumption.

Monthly PCE data are released by BEA and subject to revisions as more complete information becomes available. The PCE framework differs from the CPI in its methodology and weights, reflecting changes in consumer behavior and substituting goods when relative prices change, which can yield different inflation readings.

Because PCE can stand for several terms in different fields, some contexts use the acronym differently; this article focuses on Personal Consumption Expenditures as a macroeconomic measure.