USD PCE Core Price Index (Y/Y)
A stable Personal Spending figure reflects that consumers are purchasing goods and services, thus spurring output growth and fueling the economy. The report is greatly valued mainly due to its capability of forecasting inflationary pressures. An overall increase of prices may be derived from an excess take in of these high levels of production and consumption. The Fed utilizes a measure of inflation resulting from the PCE as their primary gauge of inflation. Persistently low Personal Spending however, may lead to decreasing output levels and an economic downturn. Income is either spent or saved. This causes Personal Spending (when reported as a percent of income rather than the headline percent change) to have an inverse relationship to personal saving. Economists watch the growth of Personal Spending in relation to income and saving in order to determine if consumers are living beyond their means, which would influence levels of borrowing and future consumption.