According to the Bureau of Economic Analysis, “Personal income increased $116.8 billion (0.5 percent at a monthly rate) in March… Disposable personal income (DPI)—personal income less personal current taxes—increased $102.0 billion (0.5 percent) and personal consumption expenditures (PCE) increased $134.5 billion (0.7 percent). Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $136.6 billion in March. Personal saving was $872.3 billion in March and the personal saving rate—personal saving as a percentage of disposable personal income—was 3.9 percent.”
Bloomberg summarized, “US consumer spending jumped in March while a key measure of inflation decelerated…” US consumers spent more on almost every major category of goods and services, with a big surge in automobile purchases (see first chart below). Suspicion also surged that the principal tail-wind for this increased consumption is widespread expectation of tariff-related price increases. Freight volumes and values were well off January bottoms and consistent with same-month results over the last decade (with the dramatic exception of March 2020). April flash-results have not — yet — been in free-fall (here and here and here). Bloomberg called the March outcomes “a welcome reprieve before tariffs are expected to broadly drive up prices.”
Below I display a couple of long-tailed charts. The blue line tracks total inflation-adjusted Personal Consumption Expenditures. The red line tracks real PCE for Food-at-Home. There are many indicators (here and here) suggesting consumer confidence is low, moving lower, and expectations are for choppy or worse economic conditions ahead. The surge in automobile purchases can be interpreted as reflecting these expectations. My personal assessment of what’s ahead — if current tariff policies persist — shares this pessimism. But despite all the turmoil, uncertainty, and very real challenges, through the end of March robust demand continued to pull robust flows of goods (and services).
