U.S. consumers began to "hit the brakes" in April as the Federal Reserve's favorite inflation indicator remains moderate

Zhitong
2025.05.30 13:31
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American consumers began to "hit the brakes" in April, with inflation remaining moderate, in line with the trend of economic slowdown. In April, inflation-adjusted personal spending increased by 0.1%, and the core Personal Consumption Expenditures (PCE) price index rose by 2.5% year-on-year, marking the lowest increase in over four years. Imports fell by nearly 20%, leading to a significant narrowing of the goods trade deficit. Consumer confidence has significantly declined, with personal financial confidence at a historical low. The Federal Reserve may keep interest rates unchanged in the foreseeable future, and economists are paying attention to the impact of tariffs on consumer spending

According to the Zhitong Finance APP, American consumers began to "hit the brakes" in April, while inflation remained moderate, aligning with the trend of economic slowdown. Data released by the Bureau of Economic Analysis on Friday showed that personal consumption expenditures adjusted for inflation increased by 0.1% in April, down from a 0.7% increase the previous month. Meanwhile, the inflation indicator favored by the Federal Reserve remained moderate. The core Personal Consumption Expenditures (PCE) price index, excluding food and energy, rose by 0.1% month-on-month and 2.5% year-on-year, marking the smallest annual increase in over four years.

Another data release on Friday showed that imports fell by nearly 20%, leading to a significant narrowing of the U.S. goods trade deficit in April.

These data indicate that after experiencing the weakest quarter of spending in nearly two years, many American consumers are feeling anxious about the economy. Although the increase in import tariffs has not yet been broadly reflected in rising goods prices, consumer confidence has significantly declined, and personal financial confidence is at a historical low.

Meanwhile, the Trump administration has withdrawn or suspended some tariffs. On Wednesday, a U.S. court ruled that several of Trump's import tariffs were illegal.

Despite this, the changing trade policies have intensified uncertainty, making the outlook for consumer spending unclear. Additionally, Federal Reserve policymakers may keep interest rates unchanged for the foreseeable future until they have a clearer understanding of the impact of tariffs on economic pillars such as prices, the labor market, and consumer spending.

Economists are closely monitoring the extent to which businesses pass on higher import tariffs to consumers. A goods inflation indicator excluding food and energy rose by 0.3%.

So far, many companies have absorbed or offset most of the impact of tariffs, but retailers such as Walmart and Macy's have indicated that Americans will soon begin to see price increases

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