Economy

The core personal consumption expenditures price index, a key Fed inflation measure showed a 0.4% increase in February, putting the 12-month inflation rate at 2.8%, both higher than expected.
Consumer spending accelerated 0.4% for the month, below the 0.5% forecast. That came as personal income posted a 0.8% rise, against the estimate for 0.4%.

The Federal Reserve’s key inflation measure rose more than expected in February while consumer spending also posted a smaller than projected increase, the Commerce Department reported Friday.
The core personal consumption expenditures price index showed a 0.4% increase for the month, the biggest monthly gain since January 2024, putting the 12-month inflation rate at 2.8%. Economists surveyed by Dow Jones had been looking for respective numbers of 0.3% and and 2.7%.

Core inflation excludes volatile food and energy prices and is generally considered a better indicator of long-term inflation trends.
In the all-items measure, the price index rose 0.3% on the month and 2.5% from a year ago, both in line with forecasts.
At the same time, the Bureau of Economic Analysis report showed that consumer spending accelerated 0.4% for the month, below the 0.5% forecast. That came as personal income posted a 0.8% rise, against the estimate for 0.4%.
Stock market futures moved lower following the release as did Treasury yields.
Federal Reserve officials focus on the PCE inflation reading as they consider it a broader measure that also adjusts for changes in consumer behavior and places less of an emphasis on housing than the Labor Department’s consumer price index. Shelter costs have been one of the stickier elements of inflation and rose 0.3% in the PCE measure.

“It looks like a ‘wait-and-see’ Fed still has more waiting to do,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Today’s higher-than-expected inflation reading wasn’t exceptionally hot, but it isn’t going to speed up the Fed’s timeline for cutting interest rates, especially given the uncertainty surrounding tariffs.”
Good prices increased 0.2%, led by recreational goods and vehicles, which increased 0.5%. Gasoline offset some of the increase, with the category falling by 0.8%. Services prices were up 0.4%.
Households also grew more cautious with their money, as the personal saving rate increased to 4.6%, the highest since June 2024.
The report comes with markets on edge that President Donald Trump’s tariff intentions will aggravate inflation at a time when the data was making slow but steady progress back to the Fed’s 2% goal.
After cutting rates a full percentage point in 2024, the central bank has been on hold this year, with officials of late expressing concern over the impact the import duties will have on prices. Economists tends to consider tariffs as one-off events that don’t feed through to longer-lasting inflation pressures, but the encompassing scope of Trump’s tariffs and the potential for an aggressive global trade war are changing the stakes.
Correction: Consumer spending increased 0.4% in February. An earlier headline misstated the number.
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The Federal Reserve’s preferred inflation measure showed underlying price pressures persisting in February.Americans hoping for some relief on inflation suffered a setback in February, as new data showed underlying price pressures intensifying even before the latest escalation in President Trump’s trade war.The Personal Consumption Expenditures price index, after stripping out volatile food and energy items, climbed 2.8 percent in February from a year earlier, outpacing January’s annual pace. On a monthly basis, these prices ticked up another 0.4 percent, higher than the monthly increase in January.Overall inflation came in at 2.5 percent, a level that sits well above the Federal Reserve’s 2 percent target and has been more or less in place since November.The latest data from the Commerce Department highlights the extent of the challenge the central bank is confronting. Its debate over what to do about interest rates has been complicated by a rapidly escalating trade war, one that has bred extreme uncertainty about the economic outlook.On Wednesday, Mr. Trump announced 25 percent tariffs on cars and car parts imported into the United States and has vowed to unveil another set of tariffs next week.With the scope and scale of the tariffs not yet clear, and a host of other policies pertaining to immigration, taxes and deregulation still being worked out, the Fed has opted to stand pat until it gets more clarity about what exactly Mr. Trump will enforce and how consumers and businesses will respond.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Mexico’s economy is slowing sharply and will soon fall into recession, several economists predict, as Donald Trump’s changing tariff plans cast uncertainty over the relationship with its largest trading partner.Mexico is one of the countries most vulnerable to the US president’s drive to reshore investment and close trade deficits. The country’s economy was already fragile, with the government cutting spending due to a gaping budget deficit and investors spooked by its radical judicial reforms.Mexico’s GDP shrank 0.6 per cent in the fourth quarter of last year from the previous three months, while economic activity fell 0.2 per cent in January.The central bank cut its key interest rate by 50 basis points on Thursday, warning that the economy would show weakness in the first quarter and that trade tensions posed “significant downward risks”.Deputy central bank governor Jonathan Heath said fourth-quarter data showed a broad-based downturn. “All the components of the internal economy are in negative territory,” he told the Financial Times. “It’s broad enough to say it’s a generalised fall.”Five economists from global banks said it was very likely that Mexico’s GDP would shrink for the second straight quarter in the three months to March.“It is also increasingly likely that growth for the full year will also be negative, and there is not much the authorities can do about it,” said Alberto Ramos, chief Latin America economist at Goldman Sachs. The Mexican peso had weakened significantly against the dollar long before Trump’s victory in November, as President Claudia Sheinbaum’s party embarked on a sweeping overhaul of the economic and political system. Her government is introducing elections for judges, dissolving independent regulators and reforming the electoral institute.The combination of Trump’s tariffs and controversial domestic reforms had inflicted a double blow on investor confidence, said Ernesto Revilla, chief Latin America economist at Citi.“This near-certain recession for Mexico is not only due to tariff uncertainty, but also to the negative domestic confidence shock associated [with] the deep constitutional reform,” said Revilla, former chief economist at Mexico’s finance ministry. Sheinbaum says the reforms will encourage investment by eliminating corruption in the courts and simplifying regulations. “The economy is strong,” she insisted last week. “That’s something we should all be proud of because it’s not just an achievement of the Mexican government but an achievement of all Mexicans.”Claudia Sheinbaum’s government is introducing elections for judges, dissolving independent regulators and reforming the electoral institute More

Carmakers are likely to face higher costs regardless of how they respond to President Trump’s 25 percent tariffs on cars and auto parts.Automakers can respond to President Trump’s new 25 percent tariffs on imported cars and parts in several ways. But all of them cost money and will lead to higher car prices, analysts say.Manufacturers can try to move production from countries like Mexico to the United States. They can try to increase the number of cars they already make here. They can stop selling imported models, especially ones that are less profitable.But whatever carmakers decide, car buyers can expect to pay more for new and used vehicles. Estimates vary widely and depend on the model, but the increase could range from around $3,000 for a car made in the United States to well over $10,000 for imported models.Those figures do not take into account additional tariffs that Mr. Trump said he would announce next week to punish countries that impose tariffs on U.S. goods. He has also said he would increase tariffs further if trading partners like Canada and the European Union raise tariffs in response to his auto tariffs, leading to an escalating tit-for-tat trade war.“It’s going to be disruptive and expensive for American consumers for several years,” said Michael Cusumano, professor of management at the MIT Sloan School of Management.Mr. Trump has long brandished tariffs. But many auto executives had hoped that his threats were a negotiating tool. Mr. Trump dashed those hopes on Wednesday when he said at the White House that the tariffs were “100 percent” permanent.Where Popular Cars (and Their Parts) Come FromHere is a selection of well-known models and where their components come from, as well as where the vehicle is ultimately assembled.

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Source: National Highway Traffic Safety AdministrationBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldSix long months ago, when Donald Trump was campaigning to become the 47th president of the United States (remember that?) he promised to deliver a “winning” economy and to slash inflation. It seemed that voters believed him. No longer. This week, the Conference Board released a survey showing that consumer confidence has fallen to “the lowest level in 12 years and well below the threshold . . . that usually signals a recession ahead”. Worse still, voters expect inflation to exceed 6 per cent because of Trump’s tariffs — dramatically higher than last year. This might be skewed by partisan politics: Democrats are particularly gloomy, Pew data shows. And consumer sentiment surveys have mixed predictive value. But the Conference Board’s poll is echoed by surveys elsewhere. And this week Austan Goolsbee, a senior Federal Reserve official, warned that this sentiment swing will make it harder for the Fed to cut rates, as Trump badly wants (partly in order to avert a debt explosion).So what can the White House do? One obvious solution would be to reduce the angst and uncertainty about tariffs. But don’t bet on that happening anytime soon, least of all ahead of what Trump is calling “liberation day” on April 2. The president thinks that tariffs are a “beautiful word”, since they have given him leverage, and key advisers such as Peter Navarro deny that they are inflationary.However, another issue to watch instead is the price of oil. For this is now viewed by some Trump advisers as a crucial anti-inflation tool — albeit one that inadvertently also reveals the contradictions in their policymaking. On paper, Trump’s vision for fossil fuels seem clear. Scott Bessent, the Treasury secretary, has long championed a “three arrows” economic plan. This aims for a 3 per cent deficit, 3 per cent growth rate and an increase in oil and gas output by the equivalent of 3mn barrels per day.Bessent argues that Trump’s “drill baby drill” mantra will boost American industry. It will also increase America’s geopolitical dominance, by taking pricing and supply power away from Opec countries. More important still, lower petrol — or “gas” — prices could act as a deflationary force to offset the impact of tariffs, particularly when coupled with deregulation. Or so the argument in Trumpland goes. After all, energy is not just a big component of household spending; pump prices are one of the most visible barometers of inflation for voters. They are a heuristic, as Daniel Kahneman, the behavioural psychologist, might have said. And since lower oil prices would also squeeze the economies of producers such as Russia and Saudi Arabia, a side benefit is raising Trump’s leverage in any negotiations with these countries. Hence the chatter around the White House is that the president should target a price of $60, or even $50, per barrel — compared to around $70 today.However, there are three big headwinds to contend with. One is that Trump does not want to alienate the Saudi regime too deeply (although some advisers think that they could offset lower prices by purchasing Saudi oil to replenish low US stockpiles).A second issue is revealed in an extraordinary survey released by the Dallas Fed this week. This shows that shale producers view the current economic chaos and price chatter as such a “disaster” that they are refusing to raise production. Or as one respondent said: “The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures.” And while the Trump team is trying to counter this with loose permitting rules and performative attacks on renewable energy, JPMorgan calculates that the number of rigs has slightly fallen of late. This is a sharp, and ironic, contrast with what happened during the previous administration of Joe Biden, when the rig count surged.The third problem is Trump’s own geopolitical stance. Instability in the Middle East — for example, the recent attacks on the Houthis — typically raises the oil price. So do tariffs. This week, say, oil prices rose after Trump threatened sanctions, or secondary tariffs, against anyone buying Venezuelan oil.The next thing to keep an eye on is Canada. If Mark Carney, the new Canadian prime minister, wants to placate Trump, his best bet might be to pledge to sell (even) more of the 6mn barrels of crude oil his country produces each day to America (which is the world’s largest oil consumer), at cheap prices. Since Trump is personally fond of Carney, this might work. But it is unclear if Carney will play ball. And if he does not — and Trump unleashes a fully-fledged trade war — that may blow up a cheap energy policy (even if a recession would normally drag prices down). So if you are confused about Trump’s energy plan, you are not alone. And while fostering such confusion is partly a deliberate tactic designed to increase the administration’s negotiating leverage, not even Trump can ignore those consumer polls forever. If inflationary expectations keep surging, expect more “drill, baby, drill” memes. Yes, this is partly a Trumpian gesture of defiance. But it might yet become a squeal of desperation too. [email protected] More

Canada has long been the largest export market for the Pinot Noir grown on the hillside vineyards of Sokol Blosser Winery in Oregon. Now that market has disappeared.Alarmed by US President Donald Trump’s tariff threats and his calls to annex Canada, provincial authorities stopped purchasing alcohol from their southern neighbour. The national government has imposed 25 per cent tariffs on an array of US imports including wine, spirits and beer.The measures have delivered another blow to a US industry in decline as consumers cut their drinking.“We’ve been building this market for over 40 years and in one fell swoop, our president has basically lit that market on fire,” said Alex Sokol Blosser, president of the winery that bears his family name.Alex Sokol Blosser, president of Sokol Blosser Winery, said: ‘I don’t know if we can recover from this 51st state bullshit’ More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Athleisure maker Lululemon Athletica reported slowing traffic in its hundreds of US stores as worries over the economy prompt consumers to take a more cautious look at its $100 yoga pants.The Canadian company reported record revenue of $10.6bn for 2024, a rise of 10 per cent year on year, as new stores opened and sales at existing stores grew overall. Annual net income grew by 17 per cent to $1.8bn, also a new high.But the figures also revealed weakness in its biggest market of the US, whose 374 stores sell high-end Lululemon workout gear — and where consumer sentiment has been shaken by persistently high inflation and President Donald Trump’s tariffs on trading partners. Same-store sales in the Americas division were unchanged in the fourth quarter of 2024 and decreased by 1 per cent for the full year. Traffic to US stores has been declining in the company’s first quarter, which began in early February, executives said. “We started this year with several compelling new product launches, but we also believe the dynamic macro environment has contributed to a more cautious consumer,” Calvin McDonald, chief executive, told analysts. Citing a survey Lululemon conducted earlier this month, he added that “consumers are spending less due to increased concerns about inflation and the economy”. Shares of Lululemon fell by 10 per cent in after-hours trading in New York.A series of economic data releases, surveys and corporate announcements have pointed to consumer retrenchment as Trump unleashes tariffs on an array of imports and countries. A US consumer expectations index published by the Conference Board think-tank this week fell to the lowest level in a dozen years and one that usually signals a recession. Nike, the shoe and athletic apparel company that is a competitor of Lululemon, last week forecast an unexpected drop in quarterly revenue.Lululemon chief financial officer Meghan Frank told analysts its gross profit margin was likely to decline by 0.6 percentage points this year compared with 2024, in part due to “the impact of increased tariffs related to China and Mexico”. Both countries have Lululemon stores and are subject to new US tariffs.In a regulatory filing, Lululemon said most of its products were manufactured in Vietnam, Cambodia, Sri Lanka, Indonesia and Bangladesh.If the tariffs expand — as Trump aims to do next week — “we’ll continue to look across our cost structure as well as to pricing, should the environment change”, Frank said. More