The Personal Consumption Expenditures (PCE) Price Index data for August has been released by the US Bureau of Economic Analysis (BEA). The PCE Price Index is the Federal Reserve’s (Fed) preferred indicator of inflation and, therefore, market participants keep a close track of it.

The US PCE price index increased 0.3% month over month in August 2026, following a downwardly revised 0.1% advance in July and falling slightly short of market forecasts of 0.4%.

The core PCE price index, excluding food and energy, rose 0.2%, missing expectations of 0.3%. Year-on-year, headline PCE inflation remained at 3.4%, unchanged from a downwardly revised July figure, while core inflation remained stable at 3.0%.

The PCE price index, the Fed’s preferred inflation gauge, has remained above the 2% objective since 2021.

Personal income increased $66.6 billion (0.2 percent at a monthly rate) in August, according to estimates released today by the U.S. Bureau of Economic Analysis (BEA). Disposable personal income (DPI)—personal income less personal current taxes—increased $68.6 billion (0.3 percent), and personal consumption expenditures (PCE) increased $190.8 billion (0.9 percent).

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Job Market

Meanwhile, Private businesses in the US added 90K jobs in September 2026, above market expectations of 70K, following a downwardly revised 36K in August.

Hiring accelerated for the first time since May, led by education and health care (+55K) and leisure and hospitality (+22K).

In contrast, financial activities (-16K) and professional and business services (-11K) showed weakness. Large companies added 14K jobs while those with fewer than 50 employees added 23K. “It’s a strong report. After a three-month slowdown, job creation rebounded and pay growth remained solid”, according to Nela Richardson, ADP.

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Bottomline

Along with the US CPI data, the movement in the PCE index will help market participants place their bets on what the central bank may do in the last two meetings of the year.

The Iran war-led surge in oil prices has kept inflation sticky, and that pushed the US Fed to hike rates in September, its first increase since July 2023. Oil continues to stay elevated above $100, up 7% in the last month. With no resolution to the US-Iran war in sight, apart from proposals coming from both sides, energy costs are likely to remain high. That could push the central bank towards more rate hikes in the sessions ahead.

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The next FOMC meeting is on October 27-28, with the final meet-up this year on December 8-9. With the 10- and 30-year bond yields crossing 5%, their highest in decades, and more rate hikes looking imminent, the road ahead for risk assets could get more volatile than markets currently expect.

New Methodology

From today’s release, BEA has made methodological updates that is expected to improve inflation-adjusted consumer spending statistics and the personal consumption expenditures (PCE) price index. The improvements involve three components of the PCE price index:

Portfolio management and investment advice services: This change will better reflect the timing and quantity of services consumed. The quantity of portfolio management services will be derived using a U.S. Bureau of Labor Statistics (BLS) Current Employment Statistics-based quantity extrapolator from the portfolio management and investment advice industry.

This improved methodology will replace deflating nominal consumer spending on these services with the BLS producer price index (PPI) for portfolio management and investment advice services.

Legal services: This change will replace source data that has become volatile and can’t be corroborated. A BEA composite price index derived using detailed PPIs for selected legal services consumed by households will replace the consumer price index (CPI) for legal services beginning in 2024.

The CPI for legal services, mostly unpublished since 2023, was last published for the month of September 2024. After that month, BEA used unpublished CPI values provided by BLS.

The unpublished CPI values, however, do not meet BLS publication quality guidelines and have recently exhibited erratic changes that cannot be corroborated and are not consistent with other source data.

Computer software and accessories: This change will better reflect the composition of products included in this category.

A BEA-composite price index derived using the CPI for computer software and accessories; the PPI for game software publishing; and the PPI for hosting, active server pages, or ASP, and other IT infrastructure provisioning services will replace the CPI for computer software and accessories.

On source data, BEA will incorporate data not available for earlier estimates. Those data include:

Census Bureau Annual Integrated Economic Survey data
Census Bureau Annual Survey of State and Local Government Finances
Internal Revenue Service Statistics of Income data
Federal government budget data
Department of Agriculture farm income statistics
National Science Foundation annual surveys
BEA’s International Transactions Accounts’ annual update results

Disclaimer: The data and information provided in this article are for informational purposes only and should not be construed as investment advice. Readers are advised to consult a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses arising from the use of this information.