2014•Economic TrendsRequires access

PCE and CPI Inflation: What’s the Difference?

Joseph G. Haubrich, Sara Millington

Abstract

There are two common measures of inflation in the US today: the Consumer Price Index (CPI) released by the Bureau of Labor Statistics and the Personal Consumption Expenditures price index (PCE) issued by the Bureau of Economic Analysis. The two measures, though following broadly similar trends, are certainly not identical. Both indexes calculate the price level by pricing a basket of goods. If the price of the basket goes up, the price index goes up. But the baskets aren’t the same, and it turns out that the biggest differences between the CPI and PCE arise from the differences in their baskets.

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Key concepts: Economics, Personal consumption expenditures price index, Producer price index, Inflation (cosmology), Price index, Wholesale price index, Index (typography), Consumer price index (South Africa)