Comparison between CPI and PCE from 2000

The graph depicts a comparison of various inflation indices from the year 2000 to approximately the current date. There are four lines representing different measures of inflation:

• CPI All Items (blue line)
• CPI Core Items (green line)
• PCE All Items (orange line)
• PCE Core Items (red line)

CPI stands for Consumer Price Index, and PCE stands for Personal Consumption Expenditures. Both indices measure inflation, but they have different scopes and methodologies. CPI is the more commonly cited measure and is often used to adjust wages and retirement benefits. It measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. CPI Core Items exclude food and energy prices, which tend to be more volatile.

On the other hand, PCE includes the actual spending of households as well as the imputed spending (like financial services provided without payment) and weights items according to how much consumers spend on them. PCE Core Items, similar to CPI Core, exclude food and energy.

From the plot, we can make a few observations:

1. There are periods where the indices move together, indicating that the different measures of inflation tend to agree on the inflation rate trends.

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3. The CPI measures, both for All Items and Core Items, tend to be higher than the PCE measures. This is a known difference, often attributed to the different weighting systems and scope of goods and services measured.

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5. There was a significant spike in all indices around 2021, reaching a peak before declining. This spike represents a period of high inflation.

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7. At the end of the graph, the latest values for the indices are provided:

   • CPI Core Items: 3.87
   • CPI All Items: 3.11
   • PCE Core Items: 2.41
   • PCE All Items: 2.03

These values show that currently, according to this graph, inflation as measured by CPI Core Items is the highest, while PCE All Items shows the lowest inflation rate. The fact that the core measures are higher than the all items measures at this point suggests that food and energy prices may be experiencing less inflation than other goods and services.