December Consumer Spending Holds Steady; Annual Core Inflation Hits 3%

11:23 AM EST, 02/20/2026 (MT Newswires) -- US consumer spending growth unexpectedly held steady in December, while the Federal Reserve's preferred inflation metric accelerated more than Wall Street's estimates to 3% year over year, delayed government data showed Friday.

Personal consumption expenditures rose 0.4% in December, unchanged from the month prior, the Bureau of Economic Analysis said in a report. A Bloomberg-polled consensus called for growth to slow to 0.3% in December.

The report, originally scheduled to be released on Jan. 29, was delayed due to the record-long federal government shutdown late last year.

"Today's release shows that consumers had a bit less spring in their step in the final quarter of 2025 than previously reported," Ksenia Bushmeneva, an economist at TD Economics, said in a note. "This tells us that while the government shutdown didn't derail consumer spending, it still weighed on activity."

US economic growth came in well below Wall Street's expectations in the final three months of 2025 as federal spending contracted due to the longest-ever government shutdown, separate official data showed Friday.

The BEA said the annual headline PCE price index accelerated to 2.9% in December from November's 2.8%, which was the pace of growth estimated by the Street. The metric increased sequentially to 0.4% from 0.2%, topping the average analyst estimate of 0.3%.

The Fed's preferred measure, which excludes food and energy, advanced to 3% annually from 2.8% in November. The consensus was for growth to be at 2.9%. The latest print represented the highest level since February 2025, BMO Capital Markets Senior Economist Sal Guatieri said in a note.

Sequentially, the core index rose to 0.4% from 0.2%, compared with expectations for an increase of 0.3%.

"Headline and core PCE inflation remained close to 3% in December, but we expect this represents a peak and that inflation will decline to 2.3% by the end of this year," Oxford Economics Chief US Economist Michael Pearce said in remarks emailed to MT Newswires. "With the economy and labor market stabilizing and inflation still elevated, we expect the Fed will remain on prolonged hold."

Earlier this week, minutes from the Fed's policy meeting last month showed that central bank officials were divided over the projected path of interest rates as the focus shifted to concerns about elevated inflation from labor market weakness.

Markets widely expect the Federal Open Market Committee to keep its benchmark lending rate steady for the second consecutive policy meeting in March, according to the CME FedWatch tool.

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