WASHINGTON – The latest report from the Commerce Department indicates a decrease in the inflation rate, suggesting a gradual decrease in prices just before the implementation of most of President Donald Trump’s tariffs.
At the same time, consumers accelerated their spending, potentially in an effort to get ahead of the duties.
In March, consumer prices only rose by 2.3% from the previous year, compared to 2.5% in February. When excluding the fluctuating food and energy prices, core prices went up by 2.6% over the past year, which is lower than the 2.8% recorded in February. Economists pay close attention to core prices as they can offer a more accurate insight into the future direction of inflation.
This decline in inflation may only be a temporary relief until the broad tariffs imposed by the Trump administration begin to impact prices across various categories. Experts predict that inflation might rebound from its recent drop and potentially exceed 3% by the conclusion 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.
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