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Personal Consumption Expenditures for March

April 29, 2011

The March Personal Income and Outlays report was published today by the Bureau of Economic Analysis. The chart below shows the monthly year-over year change in the personal consumption expenditures (PCE) price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is a key measure watched by the Fed as a gauge of inflation.

The Headline PCE index annualized rate has increased from last month’s upwardly revised 1.60% to 1.85%. The Core PCE index decreased slightly from last month’s upwardly revised 0.91% to 0.88%.

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I’ve calculated the index data to two decimal points to highlight the change more accurately. The mainstream media will report the annualized rate as 1.8% for headline and 0.9% for core.

It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision). But PCE is a key measure of inflation for the Federal Reserve, and the recent price increases in oil and gasoline puts consumer behavior in the spotlight.

A core PCE range of 1.75% to 2% is generally mentioned as the target for the Federal Reserve’s price-stability mandate.

For a long-term perspective, here are the same two metrics spanning five decades.

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Note: I use the data from Table 9 in the full release and tables available here.

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