User spending in the United States rose steadily in March as households accelerated motor vehicle purchases to avoid higher prices and food shortages due to tariffs, but the increase did little to change economists' view that the country's economy is entering a phase of slow growth.
User spending, which accounts for more than two-thirds of the country's economic activity, jumped as much as 0.7% in March after rising to 0.5% in February, according to the Department of Commerce's Bureau of Economic Analysis on Wednesday. Economists reviewed by Reuters had previously expected a 0.5% increase for Mac, after initial reports showed a 0.4% rise in February.
This data was included in the preliminary Gross Domestic Output (KDNK) report for the first quarter also published on the same day, in which the US economy was reported to have contracted at an annual rate of 0.3%, the main impact of a record surge in imports.
Widespread tariffs introduced by President Donald Trump have sparked concerns that the economy is now facing a period of damp growth and high inflation, a situation known as stagflation. Some economic experts predict a downturn will occur. Trump also sees tariffs as a means to generate revenue to accommodate his promised tax cuts and revive the long-slumping US industrial sector.
The Personal Use Expenditure Price Index (PCE) was unchanged in March after recording a 0.4% increase in February.
For the 12 months ending March, PCE prices increased 2.3%, compared to a 2.7% increase in the previous month. Without taking into account the volatile food and energy components, the PCE price index also remained unchanged after a 0.5% increase in PCE core inflation in February. In the same 12-month period, core inflation increased 2.6%, down from 3.0% in February.
The Federal Reserve (Fed) monitors this measure of PCE prices as a key indicator of their 2% inflation target. Economists predict that inflation will spike this year as import tariffs imposed by the Trump administration increase the cost of goods.
The one-year user inflation outlook has now soared to levels last reached in 1981.
