The Personal Consumption Expenditures (PCE) Price Index is a key inflation gauge used by the Federal Reserve to assess the prices of goods and services consumed by households. Unlike the Consumer Price Index (CPI), the PCE adjusts for changing consumer behavior, reflecting how people shift spending as prices change. The core PCE, which excludes volatile food and energy prices, is especially watched by policymakers to understand underlying inflation trends. It’s considered a comprehensive measure of inflation and guides decisions on interest rates and monetary policy.
November PCE Price Index
The Personal Consumption Expenditures (PCE) price index in the United States increased by 0.1% month-over-month in November 2024, below the forecasted 0.2%.
In November, the PCE price index went up by 0.1% from the previous month. Prices for goods increased by less than 0.1%, while services prices rose by 0.2%. Both food and energy prices increased by 0.2%. When excluding food and energy, the core PCE price index also increased by 0.1%, marking the smallest rise in six months. This is compared to the 0.3% increase recorded in both October and September.
Compared to the same month last year, the PCE price index in November increased by 2.4%, below the expectations of 2.5%. Prices for goods decreased by 0.4%, but services prices went up by 3.8%. Food prices increased by 1.4%, and energy prices decreased by 4.0%. Excluding food and energy, the PCE price index rose by 2.8% from a year ago.
source: U.S. Bureau of Economic Analysis (BEA)
Real PCE
The 0.3% increase in real PCE in November was due to a 0.7% increase in spending on goods and a 0.1% increase in spending on services. The largest contributors to the increase in goods were recreational goods and vehicles, especially video, audio, photographic equipment, and new motor vehicles. For services, the main contributors were recreation services like gambling, and membership clubs, sports centers, parks, theaters, and museums.
Personal Income and Spend
In November 2024, personal income in the U.S. rose by 0.3% from the previous month. This increase was slightly below market expectations of a 0.4% increase. The rise in personal income was mainly due to higher compensation, which increased by 0.6% compared to 0.5% in October.
Within this, wages and salaries grew by 0.6%, while supplements remained steady at 0.5%. Also, disposable personal income rose by 0.3%, following a 0.7% increase in October.
Personal spending in the U.S. rose by 0.4% in November 2024, reaching an annual rate of $20.2 trillion. This was close to market expectations of 0.5%. Consumer spending on goods rebounded sharply, increasing by 0.8% compared to -0.1% in October. Durable goods spending went up by 1.8% from 0.2%, and non-durable goods spending rebounded to 0.2% from -0.3%. However, spending on services slowed to 0.2% from 0.6%.
Impacts of November PCE Data
The stock market reacted negatively to the softer-than-expected inflation data, with investors concerned about the implications for future Federal Reserve policy.
The data suggested that the Fed might pause or slowdown interest rate cuts in 2025, leading to a decline in investor confidence.
The S&P 500 index experienced a gap down following the release of the PCE data and fell below its support zone. This movement reflects investors’ concerns about the economic outlook for next year.
