A closely watched inflation gauge cooled last month in a sign that prices were steadily easing before most of President Donald Trump’s tariffs were implemented.
At the same time, consumers accelerated their spending, potentially in an effort to get ahead of the duties.
Wednesday’s report from the Commerce Department showed that consumer prices rose just 2.3% in March from a year earlier, down from 2.5% in February. Excluding the volatile food and energy categories, core prices rose 2.6% compared with a year ago, below February’s 2.8%. Economists track core prices because they typically provide a better read on where inflation is headed.
The slowdown in inflation could be a temporary respite until the widespread duties imposed by Trump begin to push up prices in many categories. Economists forecast that inflation could reverse its recent decline and reach 3% or higher by the end of this year.
Wednesday’s report also showed that consumer spending increased 0.7% from February to March, a healthy gain. Car sales spiked last month as consumers and businesses accelerated their purchases to get ahead of tariffs. Auto sales could fall in the coming months as a payback for the pulled-forward activity.
Earlier Wednesday, the government reported that consumer spending slowed in the first three months of the year, compared with last year’s final quarter, as bad weather depressed shopping and Americans took a breather after healthy spending over the winter holidays.
The nation’s economy actually shrank 0.3% in the January-March quarter as imports surged as companies sought to get ahead of Trump’s tariffs.