BY LUCIA MUTIKANI
WASHINGTON — US consumer spending increased marginally in April, with households opting to boost savings amid mounting economic uncertainty because of a constantly changing tariff landscape.
The report from the Commerce Department on Friday suggested the economy struggled to rebound early in the second quarter after contracting in the January-March quarter for the first time in three years. Gross domestic product could, however, get a lift from a sharp contraction in the goods trade deficit last month as the front-running of imports to beat tariffs faded.
Inflation was muted in April, with a measure of underlying price pressures posting its smallest annual increase in four years. But that was unlikely to encourage the Federal Reserve to resume cutting interest rates soon as import duties are expected to raise prices. Economists say the inflationary effects of tariffs have not yet shown as businesses are probably still selling inventory accumulated before President Donald Trump embarked on his aggressive trade policy campaign.
A US trade court on Wednesday blocked most of Trump’s import duties from going into effect in a sweeping ruling that the president overstepped his authority. They were, however, temporarily reinstated by a federal appeals court on Thursday, adding another layer of uncertainty over the economy’s outlook.
“There is clear evidence that consumers are battening down the hatches,” said Olu Sonola, head of US economic research at Fitch Ratings. “The Fed will welcome the favorable inflation reading in this report, but they are likely to interpret it as the calm before the storm.”
Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.2 percent last month after an unrevised 0.7 percent jump in March, the Commerce Department’s Bureau of Economic Analysis said. That was in line with economists’ expectations.
Spending was supported by outlays on services, mostly housing and utilities, healthcare as well as restaurants, hotels and motel stays. But goods spending softened amid cutbacks on purchases of motor vehicles and parts, clothing and footwear as well as recreational goods and vehicles. – Reuters
