Key Highlights

  • Personal consumption expenditures rose 0.5% in September, slightly below the 0.6% forecast and slower than the 0.9% gain in August.
  • Spending adjusted for inflation was unchanged for the month after a 0.5% increase in August, with goods spending falling 0.3%.
  • The PCE price index rose 0.5% on the month and 3.6% from a year earlier, up from 3.4% in August.
  • Core PCE rose 0.3% on the month and 3.1% from a year earlier, its highest annual reading since May.

Spending Grows, but Not Quite as Forecast

US households spent more in September, yet most of the increase reflected higher prices rather than higher volumes. Personal consumption expenditures (PCE) rose 0.5% in the month, according to estimates from the Bureau of Economic Analysis (BEA), following a 0.9% gain in August. Forecasts had pointed to 0.6%.

In dollar terms, spending increased by USD 113.1 billion. Goods accounted for USD 35.1 billion of the rise and services for USD 78.1 billion, which means services supplied more than two thirds of the increase. The slowdown from August was visible across the headline, but the level of spending continued to climb.

The monthly figure sits within a stronger quarterly picture. Separate GDP data released the same morning showed personal consumption growing at a 3.8% annual rate in the third quarter, the same pace as in the second quarter, with services spending up 4.1% and goods spending up 3.0%.

Real Spending Stalls

Spending measured in constant dollars tells a flatter story. Real PCE increased by USD 2.6 billion in September, which the BEA described as less than 0.1%, after a 0.5% rise in August. The gap between the nominal and real readings is explained by prices. Current dollar spending rose 0.5%, and the PCE price index rose 0.5% over the same month, leaving almost no growth in the volume of purchases.

Inflation Picks Up

The PCE price index increased 0.5% from August, compared with a 0.3% gain the previous month, and matched forecasts. Market data providers describe the monthly move as the largest 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.

Excluding food and energy, the core price index rose 0.3%, the same pace as in August and in line with expectations. Annual core inflation edged 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 price pressure, and it remains more than a full percentage point above the 2% objective.

The quarterly figures from the BEA show how the September gain fits a longer run. The PCE price index rose at a 2.1% annual rate in the third quarter, against 5.0% in the second quarter, while the index excluding food and energy rose 2.5%, against 3.3%. The September monthly increase therefore arrived after a quarter in which price growth had slowed from the spring.

Energy Prices Drive the Gap

Energy sat at the center of the price move. Prices for goods rose 0.8% in September, up from 0.3% in August. Nondurable goods prices rose 1.1%, helped 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% for a second month, with transportation services prices up 2.1%.

Against that backdrop, real spending on gasoline and other energy goods fell 0.1% after a 0.5% decline in August. Real food and beverage spending rose 0.1%, slowing from 0.5%. In dollar terms, goods spending rose USD 35.1 billion even as real goods spending fell 0.3%, a combination that points to price increases as the main source of the nominal gain.

Goods Retreat, Services Edge Higher

Real goods spending fell 0.3% after a 1.1% gain in August. Motor vehicles and parts dropped 2.0%, reversing a 2.4% rise. Recreational goods and vehicles slipped 0.2% after a 1.5% increase, and other durable goods fell 0.8% after a 1.5% rise. Nondurable goods spending was flat after a 0.8% gain, with other nondurable goods down 0.1% following a 1.5% increase.

Real services spending rose 0.2%, easing from 0.3% in August. Food services and accommodations increased 0.5%, down from 1.1%. Transportation services rose 0.3%, against 0.4% the month before, and housing and utilities rose 0.1%, slowing from 0.2%. Recreation services fell 0.8% following a 1.1% decline.

Income and Saving Context

Spending rose faster than income. Personal income increased 0.2%, or USD 54.5 billion, below forecasts and below the 0.3% gain in August, while disposable personal income also rose 0.2%. With prices rising faster than incomes, real disposable personal income fell 0.3% after holding flat in August. The personal saving rate declined to 3.8% from 4.0%, with personal saving at USD 911.1 billion.

Labor Department data released the same morning showed initial jobless claims at 194,000 in the week ending October 24, below the 199,000 forecast, and continuing claims at 1,701,000.

Markers to Follow

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