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Spending on goods and services consumed by people, measured in the US national accounts.
Spending can rise because people obtain more goods and services, because prices rise, or because the mix changes. Nominal PCE records spending at current prices. Real PCE uses price adjustments to estimate changes in consumption volume. Expenditure paid on people’s behalf, such as some health-care spending, helps explain why the measure does not equal the sum of cash purchases reported in a simple household budget.
Suppose a simplified consumption basket costs 100 million in one period and 102 million in the next. If an appropriate price measure rises by 1%, dividing 1.02 by 1.01 gives about 1.0099, or roughly 0.99% real growth. The example illustrates separating prices from volume; actual PCE uses detailed categories and chain-weighting rather than one fixed basket.
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