So far since Trump took office, the PCE has seen monthly changes of +0.4%, 0%, +0.1% and +0.1% in February, March, April and May. The “motor vehicles and parts” component of the PCE has seen changes of +0.1%, -0.4%, 0%, and -0.1% over those same months, showing that the amount that Americans spend on cars and parts has not yet increased.
That component of the PCE did spike notably during the COVID-19 pandemic due to supply chain issues, resulting in slow-downs in car-buying at that time.
Changes in the PCE reflect shifts in price as well as shifts in consumer behavior. “It doesn’t just track the cost of groceries per se,” explained Hoffman. “It tracks the cost of the groceries in my basket that I’ve chosen to purchase.”
In recent months, demand for cars has decreased as tariff news spooks potential buyers. As a result, car prices have remained relatively flat. But industry experts predict that prices will rise in coming months, even on vehicles that are manufactured in North America and thus exempt from tariffs.
“What we’ve seen historically is that if you put a tariff on an import, which drives up the cost, domestic firms are all too happy to raise their prices even though they’re not paying tariffs to match the price of that import,” said Dennis Hoffman, professor of economics at the W. Carey School of Business at Arizona State University.