US Consumers Pull Back Spending Amid Inflation and Trade Uncertainty

Recent economic data highlights a cautious turn in US consumer behavior. With inflation remaining elevated and trade tensions stirring fresh uncertainty, Americans are increasing their savings and spending more selectively.

The US Commerce Department reports that the personal saving rate rose to 4.6% in February 2024, indicating growing concern about the broader economic outlook. While overall spending increased slightly—up 0.4% for the month—the real, inflation-adjusted growth was just 0.1%.

Much of this consumer caution is driven by persistently high inflation. The core Personal Consumption Expenditures (PCE) price index, which excludes volatile food and energy costs, rose 0.4% in February and is up 2.8% year-over-year. These figures reinforce the notion that inflation remains stubbornly high, potentially delaying anticipated interest rate cuts by the Federal Reserve.

A notable shift in spending habits was also observed: consumers spent more on goods, possibly anticipating future price increases due to impending tariffs, while pulling back on discretionary services like dining and travel. This reflects both economic anxiety and a strategic adjustment to changing price expectations.

Consumer sentiment is increasingly cautious. A University of Michigan survey found that inflation expectations for the next year have jumped to 5.0%, with long-term projections also trending higher. These expectations, if sustained, could influence actual inflation and consumer behavior.

The possibility of new tariffs, particularly on imported vehicles and other goods, adds another layer of complexity. While incomes and disposable earnings saw modest increases in February, much of that income is being directed into savings rather than spending.

Economists are watching closely for signs of stagflation—low growth combined with high inflation—as trade policies evolve and global responses take shape. The resilience of US households and the agility of policy responses will play a critical role in shaping economic outcomes in the months ahead.

At Decode Global, we continue to monitor these developments and their implications for business strategy, economic modeling, and long-term consumer behavior trends.