Consumer spending rebounds in February amidst inflation concerns

American consumers opened their wallets again in February, reversing a slight downturn from January. However, while the latest Commerce Department report suggests a stable economic landscape, lingering concerns about inflation and impending trade policies continue to cast a shadow over growth prospects.

According to data released on Friday, the Personal Consumption Expenditures (PCE) price index—a key measure of inflation—remained steady at 2.5% year-over-year, unchanged from January. On a monthly basis, prices saw a 0.3% rise, maintaining the same pace as the previous month.

Economists had anticipated a similar trajectory, especially given declines in energy costs and stable food prices. Energy prices fell 1.1% in February, while food prices saw a slight dip from 1.6% to 1.5%, reinforcing hopes that inflationary pressures might continue to ease.

However, a deeper look at inflation suggests some underlying heat. The core PCE index, which excludes volatile food and energy prices, edged up to 2.8% year-over-year, a slight increase from 2.7% in January. On a monthly basis, it rose 0.4%, surpassing expectations. This uptick signals that inflation remains persistent, despite recent signs of moderation.

While consumer spending shows resilience, concerns about trade policy loom large. President Donald Trump’s recent tariffs on auto imports—and the prospect of additional levies—could create new headwinds for both businesses and consumers.

“The impact of tariffs could lead to a one-time inflationary shock,” noted Robert Ruggirello, chief investment officer at Brave Eagle Wealth Management. “However, the bigger question is their longevity. If a new trade agreement is reached, we may see these tariffs rolled back, limiting their impact.”

The February spending rebound marked a 0.4% increase, providing reassurance that consumers remain engaged despite economic uncertainties. This followed a revised 0.3% decline in January, which had initially raised concerns about weakening demand.

As the Federal Reserve continues to monitor inflation trends, the latest data adds another layer of complexity to the central bank’s policy decisions. If inflation remains elevated, it could delay any potential rate cuts, keeping borrowing costs higher for businesses and consumers alike.

With tariffs, inflation, and interest rates all in play, the coming months will be crucial in determining the trajectory of the U.S. economy. For now, Americans are spending—but whether that momentum holds will depend on how these economic forces unfold.