Americans saw living expenses climb again in September, with consumer prices up 3.6 percent from a year earlier, based on new Commerce Department data. This uptick, higher than August’s 3.4 percent, came as energy prices and service costs pushed inflation higher. The Bureau of Economic Analysis said the Personal Consumption Expenditures (PCE) price index rose 0.5 percent in September after a 0.3 percent gain in August. That’s the largest monthly jump since May. Core PCE inflation, which strips out food and energy, increased 0.3 percent month over month and 3.1 percent year over year, compared with 3.0 percent annually in August.
The PCE index is the Federal Reserve’s preferred inflation measure because it tracks shifts in consumer behavior and gives less weight to housing than the Consumer Price Index. September’s reading stayed well above the Fed’s 2 percent inflation target, with both headline and core inflation showing ongoing pressure. The same report showed nominal consumer spending up 0.5 percent, personal income up 0.2 percent, and real consumer spending flat in September. This means inflation absorbed all of the month’s spending increase.
Broader price pressures and consumer impact
September’s inflation touched both energy-linked prices and underlying categories. Energy prices played a role, but with core inflation still above 3 percent, the increase can’t be pinned only on energy. Consumer spending, which makes up more than two-thirds of US economic activity, rose at a 3.8 percent annualized rate in the third quarter, matching the previous quarter’s pace. Still, the flat real consumer-spending figure for September shows that higher nominal spending didn’t lead to more inflation-adjusted consumption that month. Personal income rose just 0.2 percent in September, missing the expected 0.3 percent gain. That leaves households with less room to keep up spending without tapping savings or credit.
Polls show most voters are unhappy with the current economy, especially inflation. President Donald Trump, who ran in 2024 on lowering living costs and pledged to bring gas prices below $2 a gallon, now faces criticism as the national average for gasoline sits near $4.25 a gallon. The US Energy Information Administration projects average Brent crude at $56 per barrel in 2026, a 19 percent drop from 2025, and expects average US retail gasoline prices of about $2.88 per gallon in 2026, down from $3.10 in 2025.
Core inflation and economic growth
Core inflation, which excludes food and energy, also moved higher in September, rising 3.1 percent from a year earlier, compared to 3 percent in August. Month over month, core prices rose 0.3 percent, the same as the previous month. These figures show both headline and underlying inflation stayed elevated, with the PCE index reflecting how consumers substitute between goods and services and weighing housing differently than the CPI.
The Commerce Department reported US economic growth at a 3.4 percent annualized rate in the July-September quarter, up from 2.2 percent in the prior quarter. This growth came from strong consumer spending and more business investment, including spending on artificial intelligence infrastructure. Consumer spending rose at a 3.8 percent annualized rate in the third quarter. But with September’s monthly spending flat after inflation, the quarterly growth rate may hide a weaker trend at the end of the quarter.
Household finances and Federal Reserve response
Even with strong spending, inflation is cutting into household incomes. In September, nominal consumer spending rose 0.5 percent, but real consumer spending was unchanged, and personal income increased just 0.2 percent. This points to many consumers relying on savings or credit to keep up their spending. The gap between nominal and inflation-adjusted spending matters for understanding household purchasing power.
On October 28, 2026, the Federal Reserve kept interest rates steady while inflation indicators stayed high, according to NBC News. The decision came as inflation ran above target and economic growth remained strong. This mix of high inflation and solid GDP growth makes it harder for policymakers to choose between curbing demand and avoiding harm to jobs and output. The inflation data comes from the personal consumption expenditures price index, which the Fed tracks closely because it reflects changes in consumer behavior and puts less weight on housing costs than the consumer price index.
For more details, see the original report.
