Trimmed Mean PCE Inflation Rate

Behind the numbers: PCE inflation update, April 2023

May 26, 2023

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 4.5 percent in April after increasing an annualized 1.2 percent in March. The price index for PCE excluding food and energy rose at a 4.7 percent annualized rate after increasing an annualized 3.8 percent a month earlier. Energy prices on the whole rose as an increase in the price index for gasoline more than offset declines in the other major energy components. Prices for food were essentially unchanged.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 4.4 percent in April, compared with a 3.8 percent rate in March.

Over the six months ending in April, the trimmed mean averaged an annualized 4.4 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 3.5 percent and 4.5 percent, respectively.

The 12-month trimmed mean inflation rate was 4.8 percent in April, up from 4.7 percent in March. The 12-month inflation rate for headline PCE was 4.4 percent, up from 4.2 percent in March, while the 12-month inflation rate for PCE excluding food and energy was 4.7 percent versus 4.6 percent a month earlier.

Gasoline price rises, other energy components decline

The price index for gasoline and other motor fuel rose a seasonally adjusted 2.8 percent in April after decreasing 4.7 percent in March. Prices for the other major energy components declined, with the price index for fuel oil down 4.5 percent and the price indexes for electricity and natural gas services down 0.7 percent and 4.9 percent, respectively. The price index for energy goods and services as a whole rose 0.7 percent in April after declining 3.7 percent in March.

The price index for gasoline was down 13.5 percent for the 12 months ending in April; it had been down 20.8 percent for the 12 months ending in March. Compared with April 2022, the price index for fuel oil was down 20.2 percent, while the price indexes for electricity and natural gas were up 8.8 percent and 0.2 percent, respectively. The price index for energy goods and services as a whole was down 6.3 percent over the 12 months.

After April’s increase, the price index for gasoline is likely to show a sharp decline when PCE data for May are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 1.3 percent decrease in May before seasonal adjustment. The typical seasonal pattern for May—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 4.5 percent increase, making the DOE data consistent with a 5.8 percent decrease in the seasonally adjusted gasoline price index. A decrease of that size would subtract about 1.5 annualized percentage points from May’s headline inflation rate.

Food prices flat

The price index for food and beverages purchased for off-premises consumption was essentially unchanged in April after falling an annualized 2.3 percent in March. The negligible change in the aggregate reflects a decrease in the prices of less-processed items (down an annualized 3.3 percent) that roughly offset an increase in the prices of more-processed food items (up an annualized 0.9 percent).

The price index for food as a whole was up 6.9 percent over the 12 months ending in April. The 12-month increase in the aggregate reflects a 1.6 percent rise in the prices of less-processed items and a 9.0 percent increase in the prices of more-processed items.

Core goods, services prices up

Prices for core goods rose an annualized 2.2 percent in April after increasing an annualized 2.8 percent in March.

Among core goods, the price index for computer software and accessories (down an annualized 23.2 percent) had the largest negative impact, subtracting about 0.3 annualized percentage points from April’s core rate. At the other end of the spectrum, the price index for used light trucks (up an annualized 68.5 percent) had the largest positive impact, contributing about 0.7 annualized percentage points to April’s core rate.

For the 12 months ending in April, prices for core goods were up 2.6 percent, compared with 2.5 percent for the 12 months ending in March.

Prices for core services, meanwhile, rose an annualized 5.6 percent in April after increasing an annualized 4.1 percent in March. Among components experiencing outsized changes, the price index for hotels and motels (down an annualized 34.3 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.4 annualized percentage points from April’s core rate. The price index for owner-occupied stationary homes (up an annualized 6.8 percent) had the largest positive impact, contributing about 0.8 annualized percentage points to April’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 a 6.2 percent annualized rate in April, compared with an annualized 6.3 percent increase in March. Individually, the annualized increases were 6.9 percent for rent, 6.8 percent for OER and 4.4 percent for dining out (more formally, “other purchased meals”).

For the 12 months through April, the big three index was up 8.2 percent, identical to its increase for the 12 months through March. The price index for core services as a whole rose 5.5 percent for the 12 months ending in April, compared with a 5.4 percent increase for the 12 months through March.