Inflation Trends and Consumer Spending
People shop at a Costco store in the Staten Island borough of New York City, U.S., Jan. 16, 2026.
Brendan McDermid | Reuters
Inflation has shown a slight drift further from the Federal Reserve’s target in November, aligning with expectations, according to the central bank’s preferred gauge released Thursday. The personal consumption expenditures price index, a measure used by the Commerce Department and considered the central bank’s main forecasting tool, indicated inflation at 2.8% for the month, both for headline and core, which is in line with the Dow Jones consensus.
Key Economic Indicators
The department’s Bureau of Economic Analysis reported that the rate for October was 2.7% on both a headline and core basis, with the latter excluding volatile food and energy prices. The monthly figures showed a 0.2% increase for both months. Due to the impacts from the government shutdown, which suspended data collection and reports, the BEA released the October and November numbers together.
In addition to the inflation figures, the report showed personal income up 0.1% in October and 0.3% in November, with the latter being 0.1 percentage point below the forecast. Also, personal consumption expenditures, a proxy for consumer spending, rose 0.5% in both months, matching the November forecast. The personal savings rate rose in November to 3.5%, down 0.2 percentage point from the prior month.
Economic Expansion and Consumer Resilience
Price figures for November reflected 0.2% increases in both goods and services. Food prices remained flat, while energy-related costs rose 1.9% after falling 0.7% in October. This report comes on the same day that the BEA said gross domestic product rose 4.4% in the third quarter, according to the second and final estimate. Additionally, the Labor Department reported that jobless claims are trending around their lowest level in two years.
Together, the data indicates an economy continuing to expand, with consumer spending ahead of inflation despite a somewhat softening labor market. According to James McCann, senior economist for investment strategy at Edward Jones, “The consumer continues to drive the U.S economy, with today’s data pointing to another strong gain in spending. This resilience comes in spite of last year’s slowdown in the labor market, and still elevated inflation, both of which have weighed on real incomes.”
Market Expectations and Policy Implications
Markets expect the Federal Reserve to stay on hold at its policy meeting next week following three consecutive interest rate cuts in 2025. Futures traders see at most two rate reductions this year as policymakers weigh the impact of last year’s easing, coupled with continued inflation pressures and an uncertain geopolitical landscape.
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Smart Tip for Readers
To better understand the impact of inflation on your personal finances, consider tracking changes in the prices of goods and services you regularly purchase and adjust your budget accordingly to maintain your purchasing power.
