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%.
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.