Personal Consumption Expenditure
Categories: Econ
Consumer spending makes up a big part of the U.S. economy. An estimated two-thirds of it, to be exact. Tracking consumer spending is key to tracking the overall economy. The personal consumption expenditure is the formal way to measure consumer spending.
Okay, so first: consumer spending.
You work at Smushy Love, a company that makes heart-shaped pillows. People buy the pillows...for birthdays and Valentine’s Day, and as a reward for getting their annual cardiovascular checkups. Stuff like that. The money spent on the pillows pays your salary. Customers pay Smushy Love for the pillows. Smushy Love gives some of that money to you in your paycheck. Then your paycheck allows you to buy a host of other consumer goods. You buy food and gas and clothes and electronic toothbrushes and Christmas Tree-shaped pillows...for holiday gifts and/or for Arbor Day decorations. Some of the money you spend on this stuff eventually goes to workers at the companies that make the products. These workers then spend the cash on other stuff. And so on. It’s the economic circle of life. That consumer spending cycle is what represents 2/3 of the economy. Something like $9 trillion dollars a year.
So the spending on consumer goods is crucial. Economists and policy makers need a way to track all that spending. It allows them to see how things are going, and to make predictions about overall economic growth.
Enter personal consumption expenditure.
It’s the fancy name for all that money you spend on knick-knacks and doo-dads. And services, too; consumer spending includes stuff like like oil changes and doctor visits and back hair electrolysis. Personal Consumption Expenditure, or PCE, is the official stat for measuring consumer spending in the economy. In the U.S., the figure is compiled monthly by the Department of Commerce.
The same report also includes details on personal income and disposable personal income, two measures of how much money people make. The government looks at how much Smushy Love is paying you, and how much of that money you're spending. PCE also helps to track changes in prices.
Along with the income and spending data, the government issues what's called the PCE price index. It shows how much prices for consumer goods have changed during the period. The index measures retail inflation. Or deflation, if prices are going down.
Smushy Love overproduced heart pillows ahead of Valentine's Day. Now it's March, and they've got a warehouse full of them. They drop prices to move out the inventory. That drop in prices would show up in the PCE price index.
Smushy Love is now facing lower revenue. They cut your salary. Which shows up in the government report, in the personal income section. Now you have less money to buy other goods. You spend less on clothes and back hair electrolysis. That lower spending shows up in the PCE statistic.
Now to find someone to tweeze your back hair.
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Econ: What is Personal Consumption Expen...3 Views
And finance Allah shmoop What is personal consumption expenditure Well
consumer spending makes up a big part of the U
S economy an estimated two thirds of it to be
exact Tracking consumer spending is a key to tracking the
overall economy Will the personal consumption expenditure is the formal
way to measure consumer spending Right So first what is
it consumer spending Example you work at Smooshy Love No
not that kind of company It's a company that makes
heart shaped pillows people by the pillows for you know
birthdays and Valentine's Day as a reward for getting their
annual cardiovascular checkups You know stuff like that All the
money spent on the pillows pays your salary Customers pace
mushy love for the pillows Smoochy Love gives some of
that money to you in the form of a paycheck
Then your paycheck allows you to buy a host of
other consumer goods You buy food and gas and clothes
and electronic toothbrushes and Christmas tree shaped pillows for holiday
gifts and or Arbor Day decorations You know stuff like
that Some of the money you spend on this stuff
eventually goes toe workers at the companies who make those
products These workers then spend that cash on other stuff
and so on It's the economic circle of life all
right well that consumer spending cycle is what represents two
thirds of the economy something like nine trillion dollars a
year So the spending on consumer goods is crucial Economists
and policymakers need a way to track all that spending
It allows them to see how things are going and
to make predictions about overall economic growth Enter the P
C E or personal consumption expenditure Tracker Here It's the
fancy name for all that money you spend on knickknacks
and doodads and services to like you know consumer spending
includes stuff like oil changes You get for your car
and doctor visits where you turn your head and cough
and you know a back hair Electrolysis Personal consumption expenditure
is the official stat for measuring consumer spending Any economy
in the US The figure is compiled monthly by the
Department of Commerce Will the same report also includes details
on personal income and disposable personal income Two measures of
you know how much money people make right So the
government looks at how much smooshy love is paying you
and how much of that money your spending while the
PC also helps to track changes in price's Along with
the income and spending data the government issues what's called
the P C E price index It shows how much
prices for consumer goods have changed during that period Well
the index measures retail inflation basically or deflation of prices
go down smooshy love overproduced heart pillows ahead of Valentine's
Day Now it's March and they've got a warehouse full
of them Then they drop prices Just a blowout inventory
Well that drop in prices would show up in the
PC price index It's mushy Love is now facing lower
revenue for this month Own theory Maybe they cut your
salary which then shows up in the government report in
the personal income section Now you have less money to
buy other goods and you spend less on clothes and
back hair electrolysis and well that lower spending shows up
in the PC east at the Now We gotta go
find someone else to tweeze are back hair with a 00:03:12.688 --> [endTime] discount Get out