Tariffs are expected to have an inflationary impact on the economy—and have driven down consumer confidence—but the latest data from March showed a reprieve from inflation.
The Personal Consumption Expenditures (PCE) Index, maintained by the Bureau of Economic Analysis and the Federal Reserve’s preferred inflation measure, remained flat from February to March. Both the price index and the core price index (which excludes food and energy spending) posted 0% changes month-over-month.
Year-over-year, the price index increased by 2.3%, while the core price index increased by 2.6%. This is a drop from the previously rising rates: in the March PCE (measuring February), the price index had increased 2.5% year-over-year, and core PCE had increased 2.8%.
The Federal Reserve—which has taken a cautious posture after some interest rate cuts last year—has maintained that its goal is 2% annual inflation. The Fed will next be meeting May 6 and 7 to discuss the possibility of interest rate changes. President Donald Trump has called for the Fed to lower interest rates, but the Fed Board has maintained a position of political independence.
Jason Furman, economics professor at Harvard University, described the Core PCE results as “tame…but a bit above expected” in an X (formerly Twitter) post.
Furman added that the data was “ancient history” at this point, seemingly in reference to major macroeconomic shifts taking place in April, after the data was gathered.
The rate of increase for consumer spending rose to 0.7% in March, totaling at $134.5 billion. At least some of the increased spending was attributed to uncertainty about the tariffs—consumers were racing to make purchases before the tariffs were implemented. Personal income and disposable personal income both increased by 0.5% month-over-month.
Among consumer spending, spending on cars and parts was the largest increase, by 56.6%, while spending on gasoline and energy goods dropped by 29.8%. Housing and utilities posted the fourth-highest increase in spending by 13.4%.
For the full PCE release, click here.
