U.S. Economic Activity — Real Personal Consumption Expenditures: sustained household demand amid tightening financial conditions
Real Personal Consumption Expenditures (PCE) measure inflation-adjusted household spending on goods and services and represent the largest and most stable component of U.S. aggregate demand, accounting for approximately two-thirds of gross domestic product.
From early 2023 through late 2025, real consumption increased from approximately $15.5 trillion to nearly $16.7 trillion, reflecting a sizable and persistent expansion. This trajectory underscores the central role of household demand in sustaining overall economic growth during a period of restrictive monetary policy.
Recent dynamics
Throughout 2023 and 2024, consumption growth remained positive but uneven, with short-lived pullbacks followed by renewed gains. These fluctuations were consistent with normalization after pandemic-era distortions and sensitivity to changes in real incomes and financing conditions.
In 2025, consumer spending continued to rise consistently on a monthly basis, with increases near +0.5% in several months and underlying quarterly growth rates pointing to durable expansion (e.g., real consumption up >3% annualized in Q3 2025).
Drivers of consumption resilience
Several factors have supported consumption over the period, including sustained employment, real wage gains, and relatively strong household balance sheets. Incremental increases in personal disposable income have helped underpin spending, even as real income growth shows signs of moderating.
The composition of spending reveals broad engagement across both goods and services, with services contributing consistently to overall PCE growth.
Macro context and policy relevance
The continued expansion of real consumption helps explain why overall economic activity has remained resilient despite signs of cooling in other areas such as industrial production and labor market momentum. Household demand has acted as a stabilizing force, absorbing part of the tightening impulse from monetary policy.
For monetary policy, this resilience complicates the disinflation process. Strong consumption supports growth and employment, but it also sustains demand pressures, particularly in services, and influences inflation dynamics as captured by the PCE price index — the Fed’s preferred inflation gauge.
Conclusion
Real Personal Consumption Expenditures continue to signal durable household demand in the U.S. economy. Consumption has expanded steadily since early 2023 and remained a key driver of growth through 2025.
The dominant signal is not excess acceleration but persistence. Household spending has proven robust enough to sustain expansion, reinforcing a macro environment characterized by resilience with gradually moderating momentum rather than abrupt retrenchment.