U.S. PCE Inflation Index Rises to 3.6% in September as GDP Grows Faster Than Expected
The Commerce Department reported that the personal consumption expenditures price index increased to 3.6% year-over-year in September, while third-quarter GDP was revised up to a 3.4% annualized gain.
The Commerce Department said the personal consumption expenditures (PCE) price index rose 0.5% on a monthly basis in September and was up 3.6% from a year earlier, matching the median forecast of economists surveyed by LSEG. Core PCE, which excludes food and energy, increased 0.3% month-over-month and 3.1% year-over-year, also in line with expectations.
Compared with August, headline PCE moved from 3.4% to 3.6% and core PCE from 3.0% to 3.1%. Prices for goods were 3.9% higher year-over-year, while services rose 3.5%.
The personal savings rate fell to 3.8% of disposable personal income, down from 4.0% in August. Over the past two years, the savings rate has declined from a peak of 6.2% in April 2025 and 5.6% in January 2026.
Alongside the inflation data, the Bureau of Economic Analysis released an advance estimate for third-quarter gross domestic product, showing a 3.4% annualized increase, above the 3.2% median forecast. The agency will issue two further revisions of the GDP estimate.
"Today's in-line PCE report offered little in the way of surprise. Both headline and core PCE rose to their highest levels since May, underscoring that inflation remains a stubborn issue," said Bret Kenwell, a U.S. investment analyst at etoro.
"The bright spot was the third-quarter GDP report, which showed 3.4% annualized growth and came in slightly ahead of expectations. Personal consumption led the way, while federal government consumption reached its highest level in at least five years," Kenwell added.
"The seemingly indefatigable U.S. consumer and a nascent AI investment boom continue to drive the U.S. economy, with growth running well above trend," said James McCann, senior economist for investment strategy at Edward Jones.
"Admittedly there are some headwinds incoming, which should cool activity rates a little towards the end of the year as oil prices spike and financial conditions tighten. However, the economy looks in good shape," McCann noted.
Market participants continue to price in a 25-basis-point rate hike by the Federal Reserve in December, which would place the federal funds rate in a 4.0%-4.25% range. The CME FedWatch tool indicated a 79.6% probability of such a move.
Following the data release, the S&P 500 fell more than 0.4%, the Dow Jones Industrial Average slipped over 0.3%, and the Nasdaq Composite dropped more than 1.4% in early trading.