WASHINGTON (Reuters) -U.S. consumer spending increased solidly in March as households boosted purchases of motor vehicles to avoid higher prices and shortages due to tariffs, but that did little to change economists’ views that the economy had shifted into lower gear.
Consumer spending, which accounts for more than two-thirds of economic activity, surged 0.7% last month after an upwardly revised 0.5% gain in February, the Commerce Department’s Bureau of Economic Analysis said on Wednesday. Economists polled by Reuters had forecast consumer spending would rise 0.5% after a previously reported 0.4% increase in February.
The data was included in the advance gross domestic product report for the first quarter that was published earlier on Wednesday, which showed GDP contracted at a 0.3% annualized rate last quarter, weighed down by a record surge in imports.
President Donald Trump’s sweeping tariffs have fanned fears the economy is facing a period of tepid growth and high inflation, commonly referred to as stagflation. Some economists are expecting a recession. Trump sees tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base.
The Personal Consumption Expenditures (PCE) Price Index was unchanged in March after advancing 0.4% in February.
In the 12 months through March, PCE prices increased 2.3% after rising 2.7% in February. Stripping out the volatile food and energy components, the PCE price index was also unchanged. That followed a 0.5% gain in the so-called core PCE inflation in February. In the 12 months through March, core inflation increased 2.6% after advancing 3.0% in February.
The Fed tracks the PCE price measures for its 2% inflation target. Economists are forecasting a surge in inflation this year as the Trump administration’s import duties raise the cost of goods.
Consumers’ one-year inflation expectations have jumped to levels last seen in 1981.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
