From the course: Economic Indicators

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Personal consumption expenditures

Personal consumption expenditures

From the course: Economic Indicators

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Personal consumption expenditures

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- Have you seen me shopping in a store recently? If you have chances are we weren't buying the same things. And this means that inflation will affect us differently over time because we aren't buying the same basket of goods. Central bankers know this, which is why when they look at inflation they try to capture a basket of goods that's being purchased not by you or me but by everyone in the entire economy. While the consumer price index or CPI is one measure of inflation the US central bank the Federal Reserve, prefers something called the Personal Consumption Expenditures or PCE measure of inflation. That's because the PCE covers a wide range of household spending and the Fed views it to be more representative of inflation in the economy. The central bank thinks it's more real which means we need to talk about it. This doesn't mean the CPI which I've discussed in another video is no good. The Fed watches that too and the CPI is very important for labor and goods contracts. But when…

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