Key Highlights

  • The PCE price index rose 0.5% in September, the most in six months, and 3.6% from a year earlier, up from 3.4%.
  • Core PCE, which excludes food and energy, rose 0.3% on the month and 3.1% on the year, its highest annual reading since May.
  • Gasoline and other energy goods prices jumped 9.2%, lifting goods prices 0.8% and transportation services prices 2.1%.
  • Spending adjusted for inflation was unchanged, while real disposable income fell 0.3% and the saving rate declined to 3.8%.

Headline PCE Inflation Reaches 3.6%

US inflation as measured by the personal consumption expenditures (PCE) price index accelerated in September. The index rose 0.5% from August, compared with a 0.3% gain the previous month, according to estimates from the Bureau of Economic Analysis (BEA). The monthly reading matched forecasts, and market data providers describe it as the largest increase in six months.

From a year earlier, headline PCE inflation reached 3.6%, up from 3.4% in August. The index has been above the Federal Reserve's 2% objective since 2021, so the latest annual reading stands 1.6 percentage points above it.

Core PCE Inflation Rises to 3.1%

Excluding food and energy, the core PCE price index increased 0.3% in September, the same pace as in August and in line with expectations. Market data providers note that it was the largest monthly core gain in four months. On an annual basis, core PCE inflation moved up to 3.1% from 3.0%, the highest reading since May.

Core PCE is the measure the Federal Reserve follows most closely when assessing underlying inflation. At 3.1%, it remains more than a full percentage point above the 2% objective. Because the monthly core reading matched August, the rise in the annual rate came from how September compares with the same month a year earlier.

Energy Prices Drive the Monthly Move

The gap between the headline index at 0.5% and the core index at 0.3% points to food and energy. Prices for goods rose 0.8% in September, up from 0.3% in August. Nondurable goods prices rose 1.1%, led by a 9.2% jump in gasoline and other energy goods prices. Durable goods prices rose 0.2%, compared with 0.1% a month earlier.

Services prices rose 0.3%, unchanged from August, with transportation services prices up 2.1%. That combination leaves energy and transport as the clearest sources of upward price pressure in the month.

Quarterly View of Inflation

The BEA's third quarter GDP report offers a longer view. The PCE price index rose at a 2.1% annual rate in the third quarter, compared with 5.0% in the second quarter. The index excluding food and energy rose 2.5%, compared with 3.3%. The price index for gross domestic purchases increased 3.0%, compared with 5.6%.

The September monthly increase therefore came after a quarter in which quarterly price growth had slowed from the second quarter pace.

Real Spending Stalls as Prices Rise

Higher prices showed up in household spending. Personal consumption expenditures rose 0.5% in September, a touch below the 0.6% forecast and slower than the 0.9% gain in August. Because the PCE price index also rose 0.5%, real spending was effectively unchanged. The BEA put the increase in real spending at USD 2.6 billion, less than 0.1%, after a 0.5% rise in August.

Real goods spending fell 0.3% after a 1.1% gain, with motor vehicles and parts down 2.0%. Real services spending rose 0.2%, easing from 0.3%. Real spending on gasoline and other energy goods fell 0.1% after a 0.5% decline in August.

Income and Saving Under Pressure

Personal income rose 0.2%, or USD 54.5 billion, below forecasts and slower than the 0.3% gain in August. Disposable personal income also rose 0.2%. With prices rising 0.5%, real disposable personal income fell 0.3% after holding flat in August.

Personal outlays increased USD 113.0 billion, more than double the USD 52.7 billion rise in disposable income. The personal saving rate declined to 3.8% from 4.0%, with personal saving at USD 911.1 billion.

Labor Market and Growth Backdrop

Other data released the same morning provide context. Initial jobless claims fell to 194,000 in the week ending October 24, below the 199,000 forecast and the lowest since mid July, while continuing claims were 1,701,000. Real GDP grew at a 3.4% annual rate in the third quarter, above the 3.2% forecast and up from 2.2% in the second quarter, with personal consumption rising 3.8%.

Markers to Follow

The BEA is scheduled to publish October personal income and outlays on November 25, 2026, at 8:30 a.m. EST. Items on the calendar include the path of gasoline and other energy goods prices, annual core PCE inflation relative to its 3.1% reading, real disposable income, and the saving rate relative to 3.8%.