Weaker consumer spending and stubborn inflation suggests that Trumponomics might cast a grim shadow over the coming year.
Today’s report showed personal income going up $194.7 billion in February, and consumption expenditures up $87.8 billion for the month. January revisions adjusted wages down 0.2 percent down from the initial report, and farm income down $33.9 billion.
The numbers painted a bad outlook for 2025, as spending remained lower than expected. Trump’s continued flip-flopping on tariffs and looming retaliatory measures from China, Mexico and Canada kept consumers spending less, showing yet another month of hesitancy amidst the international tug-of-war. Inflation notched up to medium-high, and the cost of food led to essentials-only shopping habits, evidenced by a drop in snack-food sales.
Last month Illinois Governor Jay Pritzker compared Trump’s rise to that of Adolf Hitler in pre-war Germany, but economist Peter Morici thinks the president is more like Nero.
“He’s watching Rome burn,” he said. But instead of playing the fiddle, he’s “taking credit.”
President Trump demanded domestic automakers keep prices stable through the new tariffs, but the task seems impossible as long as foreign parts cost more. The big three automakers, Ford, General Motors and Stellantis, have seen domestic sales go up recently. The spike indicates buyers are getting ’em cheap before tariffs affect prices.
“That’s probably consumers front-loading ahead of tariffs,” said Atakan Bakiskan, US Economist for Berenberg, a Hamburg-based bank. “The consumers are telling you that it’s a good time to buy because the prices are going to go high.”
With January’s surprisingly low spending, the March release further lowered expectations about the coming year.
“It looks like the Q1 consumer spending is going to come in quite, quite bad, almost flat,” said Bakiskan. If next month’s release is similar, the year might be on track to have lower GDP, and higher inflation than expected.
To salvage the year, “all the heavy lifting has to come from either inventories or investment really, because net exports are going to be a drag on Q1 growth anyways,” he said.
Inflationary prices and tariffs are expected to impact rural consumers more severely than urban ones, where jobs, services and goods are easier to access. Areas like Alaska, where Donald Trump received 54.54% of the popular vote, have seen consumers fleeing to more urban economies.
For the last ten years, Dominic Lozano, President of the Firefighters Association of Alaska has noticed the difference.
“We’re not offering them,” he said, “reasons to come back to Alaska. And so, yeah, our population’s dwindling.”
Trump’s secretary of the treasury Scott Bessent, has changed course on tariffs, once recognizing them as a type of inflationary tax, but now supporting them despite overseeing an economy hampered by inflation. The Federal Reserve is unlikely to budge on interest rates this year, as a result.
Ultimately, consumers are feeling the impact. The University of Michigan’s Surveys of Consumers revealed that consumers expectations dropped another 17.8 percent from last month, down 32 percent from last year.
“My mother who is a clerk in a high school cafeteria doesn’t need a PHD in economics to know what’s wrong with the economy,” said economist Peter Morici.
