Consumers spent more in March to beat tariffs
Retail spending in the United States jumped in March, beating market and investor expectations.
Compared to the previous month, shoppers spent 1.4% more on retail and food in February, according to data the Commerce Department released Wednesday. On a yearly basis, they spent 4.1% more.
But analysts and economists have warned that the boost in sales likely isn’t a positive sign for markets, instead warning that the activity is a signal that consumers are preparing for the impact of the ongoing trade war incited by the White House-imposed tariffs.
“This wasn’t just organic strength — it was preemptive buying,” financial adviser Dan Sheehan wrote on LinkedIn.
Look at sales in the auto industry, for example. Compared to February, consumer spending on cars and car parts climbed 5.3% in March, and compared to the same period a year earlier, spending was up 8.8%.
“With tariffs starting to take effect and more scheduled for Q2, consumers pulled forward big-ticket purchases from cars to electronics,” Sheehan wrote. “This type of behavior is common before inflation shocks, and it adds complexity to interpreting ‘resilient’ consumption.”
The Federal Reserve may hold off on rate cuts
Federal Reserve Chairman Jerome Powell said Wednesday that the central bank expects higher inflation in the coming months. For now, it’s waiting for “greater clarity” before making any changes to interest rates.
“The level of the tariff increases announced so far is significantly larger than anticipated,” he said in a speech to the Economic Club of Chicago. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth."
Powell said he expects “at least a temporary rise in inflation,” but he noted those effects “could also be more persistent.”
“Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored,” he said.
For now, he said, the Fed plans to balance its mandate of maintaining maximum employment and price stability as long as is possible given the market conditions, but he hinted that there could be challenges as the White House continues rolling out new policies.
Economic growth expected to slow amid trade war
The United States will likely see minimal economic growth this year and in 2026 because of tariff policies, according to economists at Fitch Ratings, a provider of credit ratings and research.
The firm downgraded its forecast for GDP growth in the U.S., estimating it will be 1.2% in 2025 and 1.3% in 2026.
That’s down from the initial forecast of 2.1%, and it’s lower than the annual average of 2.4% between 2019 and 2023.
“U.S. tariff hikes are being implemented with pace, scale and coverage that very few anticipated,” Chief Economist Brian Coulton said in a statement. “The overall U.S. effective tariff rate has already risen at the fastest rate since 1929, and our new baseline forecast assumption sees it rising to a level not seen since the mid-1930s.”