Skip to content

Behind the Numbers: PCE Inflation Update, September 2021

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 3.9 percent in September after increasing an annualized 4.2 percent in August. The price index for PCE excluding food and energy rose at a 2.6 percent annualized rate after increasing an annualized 3.2 percent a month earlier. Prices for energy goods and services rose, and food prices posted another robust increase.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 5.1 percent in September compared with a 2.7 percent rate in August. September’s one-month trimmed mean rate was the fastest since August 1990. By expenditure weight, just over 63 percent of the prices in the PCE basket rose at a better than 5 percent annualized rate in September, the highest such percentage since 1982.

Over the six months ending in September, the trimmed mean averaged an annualized 3.1 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 5.6 percent and 5.1 percent, respectively.

The 12-month trimmed mean inflation rate was 2.3 percent in September, up from 2.0 percent in August. The 12-month inflation rate for headline PCE was 4.4 percent, up from 4.2 percent in August, while the 12-month inflation rate for PCE excluding food and energy was steady at 3.6.

Energy Prices Rise

The price index for gasoline and other motor fuel rose a seasonally adjusted 1.2 percent in September after increasing 2.8 percent in August. Prices for the other major energy components also rose, with the electricity and natural gas indexes up 0.8 percent and 2.7 percent, respectively, and fuel oil index rising 3.9 percent. The price index for energy goods and services as a whole rose 1.3 percent in September after increasing 1.9 percent in August.

The price index for gasoline was up 42.0 percent for the 12 months ending in September; it had been up 42.5 percent for the 12 months ending in August. Compared with September 2020, the price index for fuel oil was up 42.6 percent, while the price indexes for electricity and natural gas were up 5.2 percent and 20.6 percent, respectively. The price index for energy goods and services as a whole was up 24.9 percent over 12 months.

After September’s 1.2 percent increase, the price index for gasoline is likely to show a much larger gain when PCE data for October are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 3.4 percent increase in October before seasonal adjustment. The typical seasonal pattern for October—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 2.3 percent price decline, making the DOE data consistent with a 5.7 percent increase in the seasonally adjusted gasoline price index. An increase of that magnitude would contribute about 1.5 annualized percentage points to October’s headline inflation rate.

Food Prices Record Another Robust Gain

The price index for food and beverages purchased for off-premises consumption rose at a 13.4 percent annualized rate in September after increasing at a 4.8 percent rate in August. The large jump in the aggregate reflects increases in the prices of both less-processed food items (up an annualized 17.2 percent) and more-processed food items (up an annualized 11.9 percent).

The price index for food as a whole was up 4.1 percent over the 12 months ending in September. The 12-month increase in the aggregate reflects a 7.9 percent rise in the prices of less-processed items and a 2.7 percent increase in the prices of more-processed items.

Prices for Core Goods Up Sharply Again

Prices for core goods rose an annualized 2.4 percent in September after increasing an annualized 6.0 percent in August.

Among core goods, the price index for women’s and girls’ clothing (down an annualized 27.5 percent) had the largest negative impact, subtracting about 0.5 annualized percentage points from September’s core rate. At the other end of the spectrum, the price index for furniture (up an annualized 32.2 percent) had the largest positive impact, contributing about 0.4 annualized percentage points to September’s core rate.

For the 12 months ending in September, prices for core goods were up 4.4 percent, compared with a 4.0 percent increase for the 12 months ending in August.

Prices for core services, meanwhile, rose an annualized 2.6 percent in September after increasing an annualized 2.2 percent in August. Among components experiencing outsized changes, the price index for air transportation (down an annualized 71.5 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.9 annualized percentage points from September’s core rate. The price index for owner-occupied stationary homes (up an annualized 5.3 percent) had the largest positive impact among components experiencing outsized changes, contributing about 0.6 annualized percentage points to September’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 5.9 percent annualized rate in September, compared with a 4.7 percent rate in August. Individually, the annualized increases were 5.6 percent for rent, 5.3 percent for OER and 7.6 percent for dining out (more formally, “other purchased meals”).

For the 12 months through September, the big three index was up 3.6 percent, compared with a 3.3 percent increase for the 12 months through August. The price index for core services as a whole rose 3.3 percent for the 12 months ending in September, compared with a 3.4 percent increase for the 12 months through August.

Trimmed Mean PCE Inflation Rate
Trimmed Mean PCE
PCE Inflation Update
Related Articles