United States PCE price index stood at 121.32 in April 2022

United States PCE price index stood at 121.3 in April 2022, growing by 0.25% m/m and 6.3% y/y, seasonally adjusted. This is the lowest reading since November 2020 and a considerable deceleration from the 0.9% monthly increase registered in March. The core PCE index which excludes food and energy prices rose by 4.9% y/y and 0.3% m/m. Prices of goods deflated for the first time since October 2020, decreasing by 0.15% m/m while prices of services inflated at the same pace from March, by 0.5% m/m. 

The personal consumption expenditure (PCE) price index is Fed's preferred gauge for inflation, not the CPI. There are three major differences between these indicators, according to the Federal Reserve Bank of Cleveland. The first one is weight-related with the CPI being based on a survey of what households are buying, while the PCE focuses on what businesses are selling. Second, the PCE covers non-direct expenditures like insurance paid via the employer, which the CPI does not. And third is the so-called formula effect, meaning the PCE reflects substitution of goods when one gets more expensive.

The easing of PCE inflation in April was also observed in consumer prices, with the CPI slowing to 8.3% from 8.5% in March. To combat rising prices, the Fed undertook two successive rate hikes in March and May – by 25 and 50 basis points, respectively. 

More about US personal income and outlays here.

Further data and analysis on the US economy are available on the CEIC US Economy in a Snapshot – Q2 2022 report.