What factors contributed to the decrease in U.S. consumer spending in January?

The decrease in consumer spending was influenced by factors such as higher bills for essentials like energy, housing, and groceries, as well as uncertainties surrounding proposed tariffs and economic conditions. Additionally, unseasonably cold weather may have impacted discretionary spending.

How did inflation affect consumer spending in January?

Inflation eased to 2.5%, but despite this, consumer spending decreased. The easing of inflation did not seem to boost spending, possibly due to concerns about future price increases linked to proposed tariffs.

What role do proposed tariffs play in consumer spending trends?

Proposed tariffs are a significant concern for consumers, as they could lead to higher prices and dampen consumer confidence. This uncertainty has prompted some consumers to spend ahead of potential price hikes.

How does the Federal Reserve's stance on interest rates impact consumer spending?

The Federal Reserve's decision to keep interest rates steady after previous cuts allows for cheaper borrowing, which can support consumer spending. However, the Fed is cautious due to economic uncertainties, including inflation and tariff impacts.

6 sources·Business

U.S. Consumer Spending Drops Amid Easing Inflation and Tariff Fears

U.S. consumer spending decreased by 0.2% in January as inflation fell, raising concerns over economic resilience amid proposed tariffs.

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The moderate report comes as investors are preparing for the final trading day of the month after a volatile week that saw technology stocks drop significantly as President Trump’s threatened tariffs spooked markets.
Fed’s preferred inflation gauge cools slightly in January after heated data this month
New York Post·18d
Mostly Reliable
This source is generally reliable but sometimes includes opinion, propaganda, or minor inaccuracies.
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Leans Right
This outlet slightly leans right.
A big concern right now is whether tariffs will push up inflation, or slow the economy, or — in a particularly toxic combination — both.
US consumers cut spending in January more drastically than at any point in the last four years
Associated Press·18d
Reliable
This source consistently reports facts with minimal bias, demonstrating high-quality journalism and accuracy.
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Center
This outlet is balanced or reflects centrist views.
Many consumers are also expressing their concerns about stubborn inflation, with a large majority of Americans telling CBS News polling that their incomes aren't keeping pace with inflation.
The PCE report, the Fed's preferred inflation measure, is out. Here's what it says.
CBS News·18d
Reliable
This source consistently reports facts with minimal bias, demonstrating high-quality journalism and accuracy.
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Center
This outlet is balanced or reflects centrist views.
Federal Reserve policymakers are focusing on the PCE headline figure as they try to slow the pace of price increases to their target of 2%, though they view core data as a better indicator of inflation.
Inflation gauge favored by Fed showed prices grew as expected in January
Fox Business·18d
Mostly Reliable
This source is generally reliable but sometimes includes opinion, propaganda, or minor inaccuracies.
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Leans Right
This outlet slightly leans right.
January's weak consumer spending likely reflected the fading lift from front-running as well as a drag from unseasonably cold temperatures and snowstorms that engulfed large parts of the country.
Inflation Ticks Down to 2.5%, in Line With Forecasts
Newsmax·18d
Mixed Reliable
This source has a mixed track record—sometimes accurate but also prone to bias, sensationalism, or incomplete reporting.
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Right
This outlet favors right-wing views.

Feb 28th, 2025, 12:36 PM ET

Summary

A summary of the key points of this story verified across multiple sources.

In January, U.S. consumer spending fell by 0.2%, the largest drop since February 2021, despite inflation easing to 2.5%. Although incomes rose 0.9%, consumer sentiment waned due to uncertainties surrounding President Trump's proposed tariffs which threaten to push prices higher. The Federal Reserve is monitoring these developments closely, and while inflation has cooled from its 2022 peak, rising tariffs could complicate economic recovery efforts. Economists remain cautious as higher tariffs could exacerbate inflation concerns, dampening consumer confidence and spending patterns.

Perspectives

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U.S. consumer spending saw a notable decline in January, the most significant drop since February 2021, amid rising economic uncertainty and fears of tariffs.
While inflation eased slightly to 2.5% annually, there are concerns about the impact of proposed tariffs on future price increases and economic activity.
Personal income increased significantly, but the higher income levels did not translate into increased consumer spending, indicating cautious behavior among consumers.

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