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Methodology changes could lower US May core PCE inflation, economists say
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Methodology changes could lower US May core PCE inflation, economists say
Jun 29, 2026 11:58 AM

WASHINGTON, June 29 (Reuters) - The May data for the U.S. Personal Consumption Expenditures Price Index, excluding food and energy, could be revised lower when the government implements methodological changes to some components later this year, economists say.

The Bureau of Economic Analysis said last week it would revamp how it calculates prices for portfolio management and investment advice services, legal services, and computer software and accessories. The changes will be included in the annual revisions to gross domestic product on September 30.

The revisions will go back to 2021. The PCE price indexes are part of the monthly personal income and outlays report, and are tracked by the Federal Reserve for its 2% inflation target.

Goldman Sachs economists estimated May's year-on-year increase in the core PCE inflation could be trimmed to 3.2% from the 3.4% reported by the BEA last week. JPMorgan expected a mild downward revision to 3.3%, after rounding. 

To calculate the deflator for computer software and accessories, the BEA said it would shift to a composite price index derived from related data from the Consumer Price Index and Producer Price Index, including PPI for game software publishing as well as for hosting and information technology infrastructure provisioning. The current methodology only uses CPI data.

"The reliance on the CPI index has recently drawn attention because the PCE index receives more than 30 times as much weight as the CPI index, while the items priced for the CPI index are not conceptually identical to the PCE definition," said Abiel Reinhart, a JPMorgan economist.

For legal services, the BEA will use PPI components. Values not published by the Bureau of Labor Statistics because of quality concerns have been used to calculate prices for legal services, and the BEA noted that these "have recently exhibited erratic changes that cannot be corroborated and are not consistent with other source data."

Portfolio management and investment prices will be calculated using a BLS employment-based quantity extrapolator from the industry, replacing "deflating nominal consumer spending on these services with the BLS Producer Price Index for portfolio management and investment advice services."

"The new methodology implies that the first two estimates of a given month of portfolio management inflation will likely be based on average hourly earnings growth," the Goldman Sachs economists said. "Subsequent estimates will be based on the difference between more accurate sources of nominal spending growth and growth in total hours worked."

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