Americans accelerated their consumer spending in February. This change followed a slight dip in January, as shown by the new Commerce Department data released today. Those are the most recent numbers, which indicate a 0.4% month-over-month growth in consumer spending. This increase represents a firm recovery from January’s 0.3% decrease. While spending jumped all over the place, inflation remained on the calm side. Monthly inflation prices increased by 0.3% from January to February, the same monthly change recorded in January.
The Personal Consumption Expenditures (PCE) price index, another central measure of inflation and the Fed’s preferred gauge, increased 2.5% in February. This rise was the same as January’s rate of increase. This continuing general inflation goes along with some of the predictions. Analysts were forecasting that the PCE price index would come in flat with the month before. Overall, the data paints a picture where business returns to normalcy and the consumer side started to reemerge but inflationary forces accelerated.
February’s surging spending is a welcome contrast to a disappointing January report that saw consumer spending fall short. The first estimate for January showed a 2.5% annual rate of increase in the PCE price index. More importantly, this trend further emphasizes the inflationary trend we’ve seen the last two months.
The broader economic landscape may be facing headwinds. Newly imposed tariffs on auto imports will do just the opposite, unnecessarily raising car prices and undermining America’s economic momentum. These tariffs are expected to contribute to higher prices in the coming months, potentially affecting consumer spending and inflation patterns.