This measures consumer spending on goods and services, adjusted for inflation.

It’s tracked to gauge consumer confidence and overall economic activity.

When real PCE increases, it usually means consumers are confident and the economy is healthy. 

When PCE decreases, it usually means households have less disposable income or are less willing to spend, either because of economic uncertainty or because of tangible financial stress.

This decrease typically confirms that a recession is already in progress.

The PCE is therefore a lagging indicator.

Recession Signal

There is no magic number that might signal a recession using this indicator.

The NBER assess this metric by looking at:

1. Depth refers to the intensity of the economic downturn.
2. Diffusion indicates how widespread the downturn is across different economic sectors.
3. Duration measures how long the downturn persists.

Where a persistent and widespread drop could suggest a recession is underway or imminent.

Track this yourself

You can find the Real Personal Consumption Expenditures here: https://fred.stlouisfed.org/series/RPI