In February, consumer spending in the United States saw a 0.4% increase, following a 0.3% decrease in January. Economists had predicted a 0.5% rise. This surge in consumer spending may be attributed to higher prices, raising concerns of subdued economic growth and increased inflation due to escalating trade tensions.

President Donald Trump's recent tariff measures, including a 25% levy on imported cars and light trucks, have negatively impacted business and consumer sentiment. These tariffs are expected to hinder economic growth, potentially leading to a recession as trade partners retaliate with duties of their own. The tariffs have widened the trade deficit, as businesses rushed to import goods before the tariffs took effect.

Consumers, anticipating higher prices, accelerated their spending, particularly in December. However, a decline in pre-emptive buying, along with adverse weather conditions at the beginning of the year, led to a slowdown in spending. This has raised concerns about a potential contraction in the economy, with GDP estimates for the first quarter hovering around a 1.0% annualized rate.

President Trump plans to introduce reciprocal tariffs in the near future to offset tax cuts and bolster the U.S. industrial sector. Economists warn that these tariffs may fuel inflation in the short term. Inflation expectations among consumers have surged, and Fed Chair Jerome Powell attributes this partly to tariffs, anticipating a slowdown in progress over the year.

The Personal Consumption Expenditures (PCE) price index rose by 0.3% in February, with a 2.5% increase over the past 12 months. Excluding food and energy components, core inflation rose by 0.4% in February and reached 2.8% year-on-year.