US Consumer Spending Growth Slows to 1.2% in April Amid Tariff Turmoil

In April, the United States witnessed a notable deceleration in consumer spending growth, dropping to 1.2% from 4% in the previous quarter. This slowdown was primarily due to weaker consumer spending, which was initially estimated to grow at 1.8% but was later revised down to 1.2%, marking the slowest growth rate in nearly two years. The downturn in consumer spending was further aggravated by tariff turmoil, which added to economic uncertainty and dampened consumer confidence.

Inflation in the US also hit a four-year low in April, with consumer prices rising by 2.3% year over year, down from 2.4% in March. This decrease in inflation was largely attributed to a drop in egg prices, which had been a significant contributor to the previous month's inflation rate. The slowdown in inflation, coupled with the deceleration in consumer spending, painted a picture of a US economy grappling with reduced consumer activity and easing price pressures.

The slowdown in consumer spending and the decrease in inflation were not the only economic indicators showing signs of weakness. Real GDP growth in the first quarter of 2025 was revised slightly higher to a 0.3% annual rate, reflecting an increase in imports and a fall in government spending. This revision highlighted the challenges faced by the US economy, as the growth in consumer spending was downgraded to a 1.2% rate from the initially reported 1.8% pace.

The economic slowdown was further compounded by persistent high consumer prices and elevated levels of uncertainty, which continued to affect households and lead to low levels of overall consumer confidence. Despite the uncertainty, leading indicators were above long-term trends across the main economies during March. However, the economic environment remained challenging, with geopolitical tensions and trade uncertainties dampening business sentiment and leading to a fall in consumer confidence.

After experiencing the strongest month of consumer spending since the beginning of 2023, U.S. consumers began to slow their spending in April, while inflation remains modest, consistent with an economic slowdown. Compared to the same period last year, the U.S. core PCE price index in April recorded an annual rate of 2.5%, the smallest annual increase in over four years. These data reveal that after the weakest quarter of consumption in nearly two years, many U.S. consumers are showing signs of potential economic anxiety. Although the high tariffs on imported goods have not been widely reflected in rising prices, consumer sentiment has plummeted significantly, and personal financial prospects are at historic lows.

Another set of data released on Friday shows that due to the largest-ever decline in import volumes (goods imports fell by 19.8% month-on-month, the largest decline on record), the U.S. merchandise trade deficit narrowed significantly in April. This data further supports the notion of an economic slowdown, as reduced imports indicate a decrease in domestic demand and consumer spending.