The U.S. consumer spending decreased in April because people stopped rushing to purchase products before import tariff increases took effect which indicates economic challenges due to unresolved trade policies.
The Commerce Department announced that U.S. spending increased 0.2% in April after a 0.7% increase in March because consumers stopped their advance purchasing of goods before import tariffs took effect. The economic slowdown occurred at the same time President Donald Trump implemented his broad import tariffs which caused price increases across numerous imported goods.
The upcoming July implementation of some tariffs did not stop consumers from making advance purchases which resulted in the higher March numbers. The initial purchasing surge from March started to lose its effect during April. The economic data reveals how trade tensions continue to make life difficult for consumers according to economists.
The current inflationary pressures remain at a moderate level. The personal consumption expenditures (PCE) price index which serves as the Federal Reserve’s preferred inflation indicator showed a 2.1% annual increase in April which marked the lowest rate since September and followed a 2.3% March reading. The core price index which excludes food and energy costs rose 2.5% during the period which fell short of market predictions.
The Fed’s early May meeting minutes revealed that policymakers grew more worried about economic growth risks and inflation potential from tariffs. The Federal Reserve maintained its benchmark interest rate at a steady position since December while it monitors the effects of trade tensions on the economy.
The economy faces potential difficulties in maintaining growth because consumer spending shows signs of slowing down despite other positive economic indicators.
