what is personal consumption expenditures pce 
personal consumption expenditures pce also known as consumer spending is a measure of the spending on goods and services by people of the united states according to the bureau of economic analysis bea a u s government agency pce accounts for about two thirds of domestic spending and is a significant driver of gross domestic product gdp 1an estimated total for pce is compiled by the bea to measure and track changes in spending on consumer goods over time this figure can provide an idea of economic strength and how price changes can affect spending 2personal spending and income statistics are released monthly in the bea personal income and outlays report the report also includes the latest calculation for the personal consumption expenditures price index pcepi which measures price changes and provides a view of inflation 3understanding personal consumption expenditures pce consumer spending is an important factor that drives the u s economy and is a key part of gdp that s why it is considered a leading economic indicator pce sheds light on buying habits and savings levels economists and analysts use pce to make projections about future spending and economic growth it gives companies insight into their business needs concerning products and services and can affect hiring and investing the bea uses consumer spending to calculate its inflation gauge the pce price index which is why measuring and tracking pce is important 3personal consumption expenditures have been reported by the bea since 2012 in both current dollars and chained dollars pce is one of the three parts of the bea s monthly personal income and outlays report the pce price indexin addition to reporting the three measurements above the personal income and outlays report includes the pce price index pcepi figures the pcepi measures the prices consumers pay for goods and services and changes in those prices it is considered a gauge of inflation in the u s economy the pce price index is calculated using pce data it may indicate whether prices are inflating or deflating and how consumer spending behavior changes in response 3the pcepi provides two figures the core pcepi can make an underlying inflation trend more visible that s because food and energy prices can obscure it due to their more frequent volatility compared to other prices the bea uses the current dollar value of pce to calculate the pce price index as mentioned pcepi shows price inflation or deflation that occurs from one period to the next like most price indexes the pcepi must incorporate a deflator the pce deflator and real values to determine the amount of periodic price change 4both the pce price index and the core pce price index which again excludes prices for food and energy show how much prices change from one period to another breakdowns of the pcepi show price inflation deflation by category as well 6in 2012 the pce price index became the primary inflation index used by the federal reserve when making monetary policy decisions the fed prefers the pcepi over the comparable consumer price index cpi because the pcepi is also weighted by data acquired through business surveys which tend to be more reliable than the consumer surveys used by the cpi pcepi also uses a formula that allows for changes in consumer behavior and changes that occur in the short term 8these factors result in a more comprehensive measure of inflation the fed depends on the nuances that the pcepi reveals because even minimal inflation can be considered an indicator of a growing economy other measures of inflation tracked by economists include the producer price index ppi and the gross domestic product price index personal consumption expenditures and the pce price index are two different measurements pce measures consumer spending on goods and services while the pcepi measures the prices of those goods and services the bureau of economic analysis calculates the figures for both 31