📈 CPI vs. PCE

PCE is tomorrow, here's what you need to know.

CPI vs. PCE

Both CPI and PCE are very important pieces of economic data that move the markets. They are similar, but have some key differences that are important to understand.

Let’s jump into it.

Weighting of CPI vs. PCE

Both CPI and PCE give you an understanding of inflation within various areas of the economy.

However, the way the two are calculated is different. The image below shows you the key differences in weighting:

The biggest drivers of variation when comparing PCE to CPI are healthcare services, shelter and financial services & insurance.

We are seeing the largest divergence between PCE and CPI in the last year than we have in a long time.

Therefore we should be focusing on the previously mentioned categories that are driving large divergences to understand how PCE will come in.

I review this in more detail in the clip here: