Hey, just so you know, some of the links on this site are affiliate links. That means I may earn a small commission if you buy something through them. It doesn’t cost you anything extra, and it helps me keep this site running. Thanks for your support!
Consumer spending is the value of goods and services purchased by, or on behalf of, U.S. residents. The Bureau of Economic Analysis calls this measure personal consumption expenditures, or PCE.
What PCE includes
PCE includes spending on goods and services. Goods can be durable items such as vehicles and furniture or nondurable items such as food and fuel. Services include categories such as housing services, health care, transportation, recreation, and financial services.
“Purchased by or on behalf of” matters
PCE is broader than simply adding up retail receipts paid directly by households. Some spending can be made on consumers’ behalf, which is one reason PCE differs from retail-sales data and from the Consumer Price Index’s scope.
Nominal vs. real consumer spending
Current-dollar PCE reflects both changes in quantities and changes in prices. Real PCE adjusts for price changes so analysts can better understand whether consumers are purchasing more or less in volume terms.
Consumer spending and GDP
In the expenditure approach to GDP, personal consumption expenditures are one of four broad components alongside private investment, government consumption and investment, and net exports.
Strong consumer spending can support GDP growth, while a broad decline can weaken it. But spending growth is not automatically healthy if it is being supported by unsustainable borrowing or if inflation is driving the dollar value higher without much real growth.
Where spending money comes from
Households finance spending from:
- wages and salaries,
- business and property income,
- government transfers,
- savings, and
- credit.
BEA also publishes disposable personal income and the personal saving rate, which help show the relationship between income, spending, and saving.
Goods vs. services can tell different stories
Spending can rotate between goods and services as prices, incomes, preferences, and economic conditions change. Looking only at total spending can hide important shifts underneath.
Retail sales are not the same as PCE
Census retail sales focus on sales at retail and food-service establishments. PCE has broader coverage and is integrated into BEA’s national accounts. The two series can move differently because they answer different questions.
Consumer spending and inflation
BEA publishes both PCE spending and the PCE price index. Separating quantities from prices matters because a household can spend more dollars simply because the same basket costs more.
How to read a spending release
- Check current-dollar PCE.
- Check real PCE after inflation adjustment.
- Look at goods vs. services.
- Compare spending growth with disposable income.
- Check the saving rate.
- Note revisions and the reporting month.
Continue learning
Read What GDP Measures, Inflation Explained, and visit the Economic Data Center.
Sources & methodology
EconomicHQ standard
Sources, dates, and methodology matter.
EconomicHQ prioritizes primary sources for consequential financial and economic claims and identifies reporting periods for changing information. This article is educational and does not provide individualized financial, investment, tax, legal, or credit advice.