Trimmed Mean PCE Inflation Rate

Behind the numbers: PCE inflation update, June 2023

July 28, 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 2.0 percent in June after increasing an annualized 1.5 percent in May. The price index for PCE excluding food and energy rose at a 2.0 percent annualized rate after increasing an annualized 3.8 percent a month earlier. Energy prices rose, led by an increase in the price index for gasoline and other motor fuel. Prices for food declined.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 2.5 percent in June, compared with 3.5 percent in May.

Over the six months ending in June, the trimmed mean averaged an annualized 4.1 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 3.3 percent and 4.1 percent, respectively.

The 12-month trimmed mean inflation rate was 4.2 percent in June, down from 4.6 percent in May. The 12-month inflation rate for headline PCE was 3.0 percent, down from 3.8 percent in May, while the 12-month inflation rate for PCE excluding food and energy was 4.1 percent versus 4.6 percent a month earlier.

Energy prices rise, on net

The price index for gasoline and other motor fuel rose a seasonally adjusted 0.9 percent in June after falling 5.6 percent in May. Prices for the other major energy components were mixed, with the price index for electricity services up 0.9 percent and the price indexes for fuel oil and natural gas services down 0.4 percent and 1.7 percent, respectively. The price index for energy goods and services as a whole rose 0.6 percent in June after falling 3.8 percent in May.

The price index for gasoline was down 28.7 percent for the 12 months ending in June; it had been down 21.6 percent for the 12 months ending in May. Compared with June 2022, the price indexes for fuel oil and natural gas were down 36.6 percent and 17.8 percent, respectively, while the price index for electricity was up 5.4 percent. The price index for energy goods and services as a whole was down 18.9 percent over the 12 months.

After June’s increase, the price index for gasoline is likely to show a decrease when PCE data for July are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 0.3 percent decrease in July before seasonal adjustment. The typical seasonal pattern for July—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 0.4 percent increase, making the DOE data consistent with a 0.7 percent decrease in the seasonally adjusted gasoline price index. A decrease of that size would subtract about 0.2 annualized percentage points off July’s headline inflation rate.

Food prices fall

The price index for food and beverages purchased for off-premises consumption declined an annualized 1.5 percent in June after rising an annualized 1.8 percent in May. The decrease in the aggregate reflects declines in the prices of both less-processed food items (down an annualized 0.7 percent) and more-processed items (down an annualized 1.8 percent).

The price index for food as a whole was up 4.6 percent over the 12 months ending in June. The 12-month increase in the aggregate reflects a 0.1 percent rise in the prices of less-processed items and a 6.4 percent increase in the prices of more-processed items.

Core goods prices down, services up

Prices for core goods fell an annualized 1.6 percent in June after increasing an annualized 4.3 percent in May.

Among core goods, the price index for computer software and accessories (down an annualized 17.9 percent) had the largest negative impact, subtracting about 0.2 annualized percentage points from June’s core rate. At the other end of the spectrum, the price index for men’s and boys’ clothing (up an annualized 10.2 percent) had the largest positive impact, contributing about 0.1 annualized percentage points to June’s core rate.

For the 12 months ending in June, prices for core goods were up 1.7 percent, compared with a 2.5 percent increase over the 12 months ending in May.

Prices for core services, meanwhile, rose an annualized 3.3 percent in June after increasing an annualized 3.6 percent in May. Among components experiencing outsized changes, the price index for air transportation (down an annualized 36.4 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.5 annualized percentage points from June’s core rate. The price index for owner-occupied stationary homes (up an annualized 5.5 percent) had the largest positive impact, contributing about 0.7 annualized percentage points to June’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 5.2 percent annualized rate in June, compared with an annualized 6.3 percent increase in May. Individually, the annualized increases were 5.7 percent for rent, 5.5 percent for OER and 4.2 percent for dining out (more formally, “other purchased meals”).

For the 12 months through June, the big three index was up 7.7 percent, compared with an 8.0 percent increase for the 12 months through May. The price index for core services as a whole rose 5.0 percent for the 12 months ending in June, compared with a 5.3 percent increase for the 12 months through May.