Americans increased their spending last month after taking a breather in January, while inflation was a mixed bag, new Commerce Department data showed Friday.
As it stood in February, America’s economic foundation remained fairly solid. However, the latest data doesn’t include the elephant in the room: President Donald Trump’s aggressive trade policy.
Recently imposed tariffs on auto imports and a looming slew of other levies stand to ding America’s economic engine and drive prices higher, economists warn.
The Personal Consumption Expenditures price index rose 2.5% in February from the year before, holding steady with what was seen in January, according to Commerce Department data released Friday. On a monthly basis, prices rose 0.3%, unchanged from January.
Economists expected that falling energy prices and stabilizing food prices would help keep the disinflationary trend at hand, and that was indeed the case: Energy prices fell 1.1% for the month while food prices eased just slightly to 1.5% from 1.6%.
Forecasts called for the PCE price index to be unchanged from January’s preliminary 2.5% rate.
However, one critical barometer the core PCE index, which serves as a gauge of underlying inflation came in slightly hotter than economists expected.
Excluding food and energy prices, which tend to be more volatile, the closely watched core PCE price index rose 0.4% for the month and 2.8% from a year before, accelerating from 2.7% in January.
Friday’s core PCE data “suggests that inflation still remains sticky, despite signs of softening in recent months,” Robert Ruggirello, chief investment officer, Brave Eagle Wealth Management, wrote in a note. “While tariffs are likely to add a one-off shock to inflation, it remains very unclear on how long the tariffs will last, as it’s very possible that a future trade deal leads to reduced or even no tariffs.”
Consumer spending rebounded in February, rising 0.4% for the month. In January, spending was weaker than initially reported and fell by 0.3%.
This story is developing and will be updated.
