Trimmed Mean PCE Inflation Rate

Behind the Numbers: PCE Inflation Update, October 2022

December 01, 2022

This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. NOTE: Terms in bold are defined in the Inflation Update Glossary.

The headline, or all-items, PCE price index rose an annualized 4.1 percent in October after increasing an annualized 4.2 percent in September. The price index for PCE excluding food and energy rose at a 2.7 percent annualized rate after increasing an annualized 5.7 percent a month earlier. Prices for core goods recorded their first decline in 20 months. Prices for food and energy rose.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 3.4 percent in October, compared with a 4.3 percent rate in September.

Over the six months ending in October, the trimmed mean averaged an annualized 5.1 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 5.0 percent and 4.7 percent, respectively.

The 12-month trimmed mean inflation rate was 4.7 percent in October, unchanged from September. The 12-month inflation rate for headline PCE was 6.0 percent, down from 6.3 percent in September, while the 12-month inflation rate for PCE excluding food and energy was 5.0 percent versus 5.2 percent a month earlier.

Energy Prices Increase

The price index for gasoline and other motor fuel rose a seasonally adjusted 4.0 percent in October after decreasing 4.8 percent in September. Prices for the other major energy components were mixed, with the price index for natural gas down 4.6 percent and the price indexes for fuel oil and electricity up 19.8 percent and 0.1 percent, respectively. The price index for energy goods and services as a whole rose 2.5 percent in October after decreasing 2.4 percent in September.

The price index for gasoline was up 18.1 percent for the 12 months ending in October; it had been up 18.8 percent for the 12 months ending in September. Compared with October 2021, the price index for fuel oil was up 68.5 percent, while the price indexes for electricity and natural gas were up 14.1 percent and 20.0 percent, respectively. The price index for energy goods and services as a whole was up 18.4 percent over the 12 months.

After October’s increase, the price index for gasoline is likely to show a decline when PCE data for November are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 3.5 percent decrease in November before seasonal adjustment. The typical seasonal pattern for November—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 1.7 percent decline, making the DOE data consistent with a 1.8 percent decrease in the seasonally adjusted gasoline price index. A decrease of that size would subtract about 0.6 annualized percentage points from November’s headline inflation rate.

Food Prices Rise

The price index for food and beverages purchased for off-premises consumption rose at a 5.5 percent annualized rate in October after increasing at a 7.7 percent rate in September. The increase in the aggregate reflects an increase in the prices of more-processed food items (up an annualized 9.4 percent) that more than offset a decline in the prices of less-processed items (down an annualized 3.9 percent).

The price index for food as a whole was up 11.6 percent over the 12 months ending in October. The 12-month increase in the aggregate reflects an 8.5 percent rise in the prices of less-processed items and a 12.8 percent increase in the prices of more-processed items.

Core Goods Prices Down, Services Up

Prices for core goods fell an annualized 3.0 percent in October after increasing an annualized 2.5 percent in September. The decline is the first since February 2021.

Among core goods, the price index for used light trucks (down an annualized 25.5 percent) had the largest negative impact, subtracting about 0.5 annualized percentage points from October’s core rate. At the other end of the spectrum, the price index for stationery and miscellaneous printed materials (up an annualized 63.1 percent) had the largest positive impact, contributing about 0.1 annualized percentage points to October’s core rate.

For the 12 months ending in October, prices for core goods were up 4.6 percent, compared with 5.7 percent for the 12 months ending in September.

Prices for core services, meanwhile, rose an annualized 4.9 percent in October after increasing an annualized 6.9 percent in September. Among components experiencing outsized changes, the price index for financial service charges, fees and commissions (down an annualized 16.6 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.5 annualized percentage points from October’s core rate. The price index for owner-occupied stationary homes (up an annualized 7.7 percent) had the largest positive impact, contributing about 0.9 annualized percentage points to October’s core rate.

Our“big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at an 8.8 percent annualized rate in October, compared with a 9.2 percent rate in September. Individually, the annualized increases were 8.7 percent for rent, 7.7 percent for OER and 11.3 percent for dining out (more formally, “other purchased meals”).

For the 12 months through October, the big three index was up 7.3 percent, compared with a 7.1 percent increase for the 12 months through September. The price index for core services as a whole rose 5.1 percent for the 12 months ending in October, compared with a 5.0 percent increase for the 12 months through September.