PCE Index: Fed’s Preferred Gauge Of Inflation Stagnates In March, Consumer Spending Picks Up

The Federal Reserve’s preferred gauge of inflation, the Personal Consumption Expenditures (PCE) price index, remained unchanged in March after rising 0.4% the previous month.

From the same month one year ago, the PCE price index for March increased 2.3%.

The Core PCE, which excludes food and energy, also remained unchanged in March compared to the previous month, but increased 2.6% from a year ago.

The stagnation in the PCE price index comes at a time when the Trump administration’s sweeping tariffs are expected to spike inflation in the coming months.

Meanwhile, consumer spending rose 0.7% in March following an upward revision of 0.5% in February. The rise in consumer spending follows aggressive purchasing by households driven by expectations of higher tariffs and shortages.

Wednesday also saw the release of U.S. GDP data, which showed the economy contracted 0.3% in March, marking the first quarter of negative growth since Q1 2022. According to a CNBC report, economists surveyed by Dow Jones anticipated a 0.4% gain after the GDP rose by 2.4% in the fourth quarter of 2024.

Following the release of the GDP data, President Donald Trump blamed the Biden administration while defending his tariff policies, stating that companies are relocating to the U.S. in record numbers.

“This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th,” he wrote on his Truth Social account.

The Bureau of Economic Analysis stated that the decrease in Q1 real GDP primarily reflected an increase in imports and a reduction in government spending. This was partly offset by increases in investment, consumer spending, and exports.

Following the disappointing GDP number, the S&P 500 and the Nasdaq Composite fell 2%, while the Dow Jones declined by 700 points, spooked by fears of a recession. The indices have since pared some of the losses from the knee-jerk reaction.    

The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 1.05% lower on Wednesday morning, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, traded 1.31% lower.

Also See: Etsy Stock Rises On Upbeat Q1 Revenue, Company Says It’s Staying Nimble In The Wake Of Tariff-Led Uncertainties

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