Consumer spending in the United States rose in February but fell short of economists’ expectations, as households cut back on dining and travel while grappling with rising costs and economic uncertainty.
Figures released by the US Commerce Department’s Bureau of Economic Analysis showed that consumer spending climbed by 0.4 per cent last month. This followed a downwardly revised 0.3 per cent decline in January and was slightly below economists’ expectations of a 0.5 per cent rebound.
The data suggests that American households remain cautious about non-essential purchases. Spending on restaurants, hotels and motels dropped sharply by 15 per cent, while expenditure at non-profit institutions also slumped by 15.8 per cent — likely impacted by federal funding cuts as President Trump moves to shrink government spending.
However, the overall picture was supported by stronger sales of durable goods, including motor vehicles, furniture, and household equipment. Non-durable goods such as food and beverages also saw a modest rise, while services spending edged up 0.2 per cent.
The weaker-than-expected rebound in spending comes amid mounting pressure on US households from rising prices and concerns over the economic outlook. Economists are increasingly warning that a series of tariffs imposed by President Trump could push inflation higher, particularly on imported goods.
Federal Reserve Chair Jerome Powell said last week that inflation had begun to rise, “partly in response to tariffs,” and warned that further progress towards the central bank’s 2 per cent inflation target could be delayed.
In the 12 months to February, core inflation — which excludes food and energy — rose to 2.8 per cent, up from 2.7 per cent in January.
The Fed, which tracks the Personal Consumption Expenditures (PCE) price index as its preferred inflation measure, left interest rates unchanged last week, maintaining its benchmark range between 4.25 and 4.50 per cent. Financial markets currently expect the Fed to resume rate cuts in June, but analysts are growing more sceptical.
Stephen Brown, deputy chief North America economist at Capital Economics, said the spending figures support the view that the Fed may hold off on rate cuts this year. “Admittedly, officials are likely to be concerned by the evidence of slower consumer spending growth, but we suspect that is partly due to the unseasonably severe winter weather,” he said.
With inflation still running hot and consumer sentiment fragile, policymakers will be watching closely for signs that demand is cooling — or whether further interest rate adjustments may be needed to keep inflation in check while supporting household spending.
