Courtesy of Doug Short.
The November Personal Income and Outlays report for October was published today by the Bureau of Economic Analysis. The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I’ve also included an overlay of the Core PCE (less Food and Energy) price index, which is Fed’s preferred indicator for gauging inflation.
The latest Headline PCE price index year-over-year (YoY) rate of 1.74% is an increase from last month’s adjusted 1.61%. The Core PCE index of 1.56% is decrease from the previous month’s adjusted 1.67%.
I’ve calculated the index data to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But PCE is a key measure of inflation for the Federal Reserve, and the price increase in oil and gasoline, although now well off their interim highs, puts consumer behavior in the spotlight.
In the past, a core PCE range of 1.75% to 2% is generally mentioned as the target for the Federal Reserve’s price-stability mandate. However, the Fed has now explicitly identified 2% as the long-term target:
The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. (See the January 25, 2012 Press Release here.)
For a long-term perspective, here are the same two metrics spanning five decades.
Note: I use the data from Table 9 in the full release and tables available here.
