Inflation remains elevated and consumer spending has tightened as all eyes are on the Fed’s favorite inflation measure ahead of the central bank’s closely watched March meeting. 

The Personal Consumption Expenditures (PCE) price index (tracking costs of goods and services) for January increased 0.3%, and saw the same increase excluding food and energy, according to the latest report from the Bureau of Economic Analysis. Year-over-year, the PCE price index saw a 2.5% increase, and is up 2.6% excluding food and energy. These metrics are in line with previous expectations.

According to the same report, PCE decreased 0.2% ($30.7 billion) in January. The report noted that the $30.7 billion decrease reflected a decrease of $76.7 billion in goods spending and an increase of $46 billion in service spending. 

This decrease is the first reported since September 2024. This data was also lower than expectations, demonstrating more frugality from consumers around the U.S.

PCE data falls in line with the elevated inflation reported in the latest Consumer Price Index (CPI), which rose 0.5% in January.

Harvard Economics Professor Jason Furman said on X (formerly Twitter) that “nothing in (this) data changes the narrative much.”

“Inflation appears to be gently slowing and that could give optimists hope that it will continue to do so,” he continued. “But core inflation is also stuck above 2.5%–much higher than the 2.1% that forecasters had expected just a year ago.”

Consumer sentiment and confidence have seen significant drops in response to the latest inflation reports, with the question of tariff implementation and its effect hanging over the heads of many consumers.

Economic data and sentiment may continue to shift as we see the implementation or abandonment of the tariff plan.

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