March Sees Surge in Consumer Spending as Americans Prepare for Upcoming Tariffs | CNN Business

Consumer spending in the U.S. soared in March, marking its biggest rise in over two years. This surge was largely driven by fears surrounding potential tariffs. Shoppers rushed to make purchases, particularly of durable goods and vehicles, as they anticipated future price increases due to these tariffs.

Data from the Commerce Department indicated that consumer spending jumped by 0.7% from February. This uptick is significant, especially as many people opted to buy now rather than wait, spurred by concerns that President Trump’s tariffs would elevate prices in the near future.

Interestingly, inflation showed signs of slowing. As of March, the overall inflation rate dropped to its lowest level since September, in part due to declining oil prices caused by recession fears. The Personal Consumption Expenditures price index, which the Federal Reserve pays close attention to, increased by only 2.3% year-over-year, down from 2.7% in February. Monthly prices remained steady, contrasting with previous gains.

Robert Frick, chief economist at Navy Federal Credit Union, commented that while the report is promising, it comes with caution. He pointed out that Trump’s policies, especially significant cuts in federal jobs and extensive tariffs, are creating uncertainty in the economy, potentially increasing the risk of recession.

Frick added, “We need to hope that incomes and jobs stay strong.” With rising prices predicted due to tariffs, individuals may face tougher financial conditions later this year.

According to recent projections, inflation is expected to increase as tariffs push up costs. Gus Faucher, chief economist for PNC Financial Services, noted that this creates challenges for the Fed, which must balance inflation control with maintaining a robust labor market.

Recent reports suggest a slowing job market. The April jobs report, which is set to be released soon, could reveal less robust employment growth. Economic activity shrank in the first quarter for the first time in three years, signaling potential challenges ahead—especially with a drop in private-sector job gains.

Despite these obstacles, the current state of the economy appears stable. Consumer spending rose sharply, driven in part by a solid 0.5% increase in personal incomes. Frick emphasized that income levels are crucial; as long as people have money, they will likely continue to spend.

While savings dipped slightly, with the personal saving rate at a healthy 3.9%, the latest data reflects a cautious optimism. As Frick put it, this report can serve as a protective barrier against the effects of tariffs and potential layoffs in the future.

In summary, while current consumer spending trends are encouraging, the looming uncertainties tied to policy decisions may pose significant challenges for the economy in the coming months.

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