PCE or CPI? US inflation is measured two ways, here's how they compare
Wednesday's Consumer Price Index report from the Bureau of Labor Statistics had a mixed bag for economists, showing a surprisingly flat month over month number with the annual number remaining above 3% though below forecaster's expectations.
The BLS reported that month over month CPI inflation was at 0% and year over year CPI inflation came in at 3.3% in May. Reuters reported that the economists it surveyed forecast CPI edging up 0.1% and gaining 3.4% year-on-year.
The Federal Reserve held its key interest rate in place on the news saying that it wanted to see more evidence that inflation is cooling.
At a news conference, Federal Reserve Chair Jerome Powell said, "We want to see more good data to bolster our confidence that inflation is moving sustainably toward 2%."
A possible piece of that "good data" could come from the Personal Cost Expenditure index, due to be released at the end of the month.
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The PCE is an inflation signal that measures a broader scope of goods and services. The PCE has largely been lower than CPI, though the two measures have historically followed similar trends. In April CPI readout at 3.4% year over year as PCE measured 2.7%.
Here's what you need to know about CPI and PCE:
What is the difference between CPI and PCE?
The Consumer Price Index and Personal Consumption Expenditure index are both measures of inflation but the two differ in the "basket of goods" they measure, according to the Federal Reserve Bank of Cleveland.
CPI measures a smaller number of items compared to the PCE and only includes expenditures made by a household. PCE measures a broader swath of items and includes purchases made on behalf of a household, such as expenditures for medical care made by employers or the government.
CPI and PCE also weight categories of goods differently.
The Bureau of Labor Statistics generally releases its CPI report in the middle of the month where the Bureau of Economic Analysis releases their PCE report at the end of the month.
The next PCE report is scheduled to be released on June 28.
