The Commerce Department’s measure of inflation showed Friday that consumer prices rose 3.9% in May from a year before, a big jump but smaller than the 5% jump registered by a Labor Department measure released two weeks ago.
So which is it? Both. Each is an official government consumer inflation gauge, but they are constructed differently and yield different results. Though they tend to move in the same general direction over time, Labor’s consumer-price index, or CPI, typically runs a bit higher than Commerce’s price index of personal-consumption expenditures, or PCE index.
Both rose significantly more in the past year than in recent years before the Covid-19 pandemic, which caused prices to plunge in the spring of 2020 as many businesses shut down and consumers hunkered down at home. The 12-month increases in both indexes last month were the biggest in nearly 13 years.
The CPI draws broader attention in general news reports, partly because it is released earlier in the month, but investors and economists also follow the PCE index because it is the Federal Reserve’s preferred gauge for assessing inflation relative to its 2% target.
Here is a brief explanation of some of the variations.
