68. Remix: What Is the PCE Index & Why Does It Matter to Us?

*This content was taken from Episode 35, which was originally recorded in May 2024, but has been edited to mainly focus on the important terms PCE, PPI & CPI to help put into context the new data we are seeing now in December 2024 and how it affects us as consumers, workers, and investors.* 

What Is PCE (Personal Consumption Expenditures)?
The PCE price index is considered The Fed’s preferred index. It’s kinda like how we use the S&P 500 indice to measure the stock market, but it’s a price index that measures specific goods and services and it’s regionalized. Basically, it's a guage on what Americans are spending and helps track inflation. It’s currently +2.8% YOY (October 2024), which is up from +2.7% in September 2024 - not what we want to see, we’d like to see it go down.

Updated Core PCE Link (excludes food and energy)
 

In Episode 15 we explained inflation and learned about PPI & CPI: 

PPI: producer price index = is the perspective of the seller 

CPI: consumer price index = is the perspective of the buyer 

   
Updated PPI Data  

What is the difference between the CPI and the PCE Index?
The CPI measures the change in the out-of-pocket expenditures of all urban households and PCE measures the change in goods and services consumed by all households, and nonprofit institutions serving households.

Dot Plot (summary of economic projections from the FOMC)