what is pce

PCE stands for Personal Consumption Expenditures, which is a measure of the spending on goods and services by people of the United States. It is essentially a measure of goods and services targeted towards individuals and consumed by individuals. The PCE measure is the component statistic for consumption in gross domestic product (GDP) collected by the United States Bureau of Economic Analysis (BEA) . It accounts for about two-thirds of domestic spending and is a significant driver of GDP. The PCE price index, also referred to as the PCE deflator, PCE price deflator, or the Implicit Price Deflator for Personal Consumption Expenditures, is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior. The less volatile measure of the PCE price index is the core PCE (CPCE) price index, which excludes the more volatile and seasonal food and energy prices. The PCE is calculated by the BEA using data from businesses and trade organizations, and the gross domestic product. The CPI, or consumer price index, is another index that measures consumer spending and is commonly used to measure inflation, although economists prefer to use the PCE to measure inflation. The PCE inflation rate is calculated by adding up the dollar amounts of all goods and services in a basket of goods and services, comparing the total to the prior month’s figures.