The Personal Consumption Expenditures (PCE) price index surged 3.6% year-over-year in September 2026, as reported by the Bureau of Economic Analysis (BEA) on Thursday at 8:30 a.m. Eastern Time.
On a monthly basis, the index rose by 0.5%, marking the most significant increase in six months. This uptick underscores the ongoing inflationary pressures that continue to erode the purchasing power of American households.
Energy costs were the primary catalyst for this rise. Gasoline and other energy-related goods within the PCE soared by 9.2% month-over-month, pushing up the non-durable goods component by 1.1% and the overall goods category by 0.8%. Services increased by 0.3%, with transportation services leading the charge with a 2.1% bump.
The most immediate metric affecting families is the real disposable personal income, which fell by 0.3% in September, following a stagnant change in August. The arithmetic is clear: nominal income only increased by 0.2%—equivalent to about $54.5 billion—while prices climbed by 0.5% over the same period. Consequently, inflation outpaced income growth, diminishing purchasing power.
Nominal consumer spending rose by $113.1 billion, representing a 0.5% monthly increase, divided into $35.1 billion on goods and $78.1 billion on services. However, when adjusted for inflation, actual spending barely budged, increasing by less than 0.1%, or just $2.6 billion. Essentially, households spent more money to purchase nearly the same amount of goods and services.
The personal savings rate settled at 3.8% of disposable income, with total savings amounting to $911.1 billion.
The core PCE, which excludes food and energy and is closely monitored by the Federal Reserve, rose 0.3% monthly and 3.1% annually, remaining 1.1 percentage points above the Fed's 2% target.
This index should not be confused with the Consumer Price Index (CPI), which the Bureau of Labor Statistics reported at 3.7% year-over-year on October 14. Both indices are complementary rather than contradictory: the PCE includes spending "by and on behalf" of consumers—such as employer-covered medical services or public programs—and assigns different weights to each category.
Housing and gasoline have a greater impact on the CPI, which explains why the overall PCE (3.6%) is 0.1 points lower than the CPI, while the core PCE (3.1%) exceeds the core CPI (2.6%) by 0.5 points.
The Fed uses the PCE, not the CPI, to assess its inflation target.
A day prior to the release of these figures, the Federal Open Market Committee (FOMC) voted 10 to 2 to keep interest rates within the 3.75%-4.00% range, just six weeks after raising them for the first time in three years.
In its statement, the FOMC acknowledged that "inflation remains elevated" and emphasized that "additional information will assist the Committee in determining the appropriate policy stance to ensure a timely return of inflation to the 2% target."
According to September projections, at least 16 of the 18 Fed officials anticipated at least one more rate hike before the end of 2026, leaving open the possibility that borrowing costs could increase further for families in the coming months.
Understanding U.S. PCE Inflation and Economic Implications
What is the PCE price index?
The PCE price index measures the average increase in prices for all domestic personal consumption. It is a key indicator used by the Federal Reserve to gauge inflation and assess economic conditions.
How does the core PCE differ from the overall PCE?
The core PCE excludes volatile food and energy prices to provide a clearer picture of long-term inflation trends. It is often used by the Federal Reserve for a more stable assessment of inflation.
Why is the real disposable income important?
Real disposable income indicates the amount of money households have available for spending and saving after accounting for inflation. It reflects the true purchasing power of consumers.