Computer Software And Accessories Impact On Core PCE* Inflation

Core Personal Consumption Expenditures (PCE) inflation rose 3.3% year-over-year as of April 2026, versus 2.8% in October 2025. What drove the acceleration? Breaking core inflation into its largest constituents—goods, nonhousing services, and housing—shows that almost all the increase in inflation over the last six months is attributable to goods. Tariffs? Oil? No: “Computer Software and Accessories.” In fact, although it accounts for just 5% of the core goods index, Computer Software and Accessories accounted for 60% of core goods inflation in the last six months after registering its largest price increases ever. The price spike reflects an extreme supply-demand mismatch amid surging need for AI and compute capacity. While surprising in the short run, whether such increases keep overall core PCE elevated depends on the more significant component of PCE inflation: services. Time will tell, but cooling income growth could constrain consumer spending power. Put another way: if your income isn’t keeping up with tech prices, you may have to choose between buying gadgets and dining out, which keeps overall price increases in check.

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Payden & Rygel is one of the largest privately-owned global investment advisers. Founded in 1983, they manage fixed income and equity portfolios through domestic and international solutions.

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