Posted on 02/28/2025 7:21:42 AM PST by lasereye
U.S. consumers cut back sharply on spending last month, the most since February 2021, even as inflation declined, though stiff tariffs threatened by the White House could disrupt that progress.
Americans cut their spending by 0.2% in January from the previous month, the Commerce Department said Friday, likely in part because of unseasonably cold weather. Yet the retreat may be hinting at more caution by consumers amid rising economic uncertainty.
Inflation declined to 2.5% in January compared with a year earlier, down from 2.6% in December, the government said. Excluding the volatile food and energy categories, core prices dropped to 2.6%, the lowest since June, from 2.9%.
One other bright spot in the report was that incomes jumped 0.9% in January from December, fueled in part by a large annual cost of living adjustment for Social Security beneficiaries.
Last month’s decline could reassure Fed officials that inflation is still slowly cooling. The Fed prefers Friday’s measure to the more widely-known consumer price index, which rose for the fourth straight month in January to 3%. Friday’s gauge calculates inflation slightly differently: For example, it puts less weight on the costs of housing and used cars.
A report from the Federal Reserve’s Boston branch this month concluded that 25% tariffs on Canada and Mexico, along with Trump’s initial 10% import taxes on China, could lift core inflation by as much as 0.8 percentage points.
The last time Trump imposed tariffs in 2018-19, inflation was largely unaffected — but those tariffs were on a much narrower range of goods. And the economy still slowed, prompting the Fed to cut interest rates.
Worries about tariffs pushing prices higher have sent consumer confidence plunging.
(Excerpt) Read more at finance.yahoo.com ...
Worries about tariffs pushing prices higher have sent consumer confidence plunging.
This is a media fabrication. I see it all over the place. That is not part of the consumer confidence data. Note that the consumer confidence drop was in January. Biden was still President most of the month. Trump didn't even do anything on tariffs in January. The typical consumer doesn't project some future impact of tariffs.
I am leery of massive tariffs but that's not the point here.
AP = BS moving on
Tends to happen shortly before and after elections.
Tariffs haven’t shaken spending. They haven’t even really been discussed or implemented.
What has shaken spending, and slowed inflation, is that the Government funded NGO’s, some employees, and many ‘agencies’ are facing the great unknown after the Treasury raid of the Biden Administration and Democrats has ended.
This was during the Biden Administration in case the AP did not point that out.
Hope this nighmare stops....then enjoyment of it stopping.
Who has time to buy, with all the good news daily!
With consumer debt being so high, maybe this is not such a bad thing. Perhaps Trump and team coming into office signaled a turning point in financial responsibility in US households as much as in government. We all need it.
January has always been our slowest month (car repair). People are broke from the holidays and waiting for their tax return.
I always have less household spending as well. Because I have lots of leftovers from stocking up for the holidays.
Media is trying to portray a natural spending ebb like it’s a crisis.
I read consumer debt just reached a record high. Perhaps there is no more credit to be had.
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