U.S. consumers cut back sharply on buying durable goods such as autos in March, leaving overall spending unchanged for a second straight month. A slowdown by consumers was a major reason overall economic growth slowed so sharply over the winter.
Consumer spending was unchanged in March after also being flat in February and posting only a modest rise of 0.2 percent in January, the Commerce Department reported Monday. For the January-March quarter, the sharp slowdown in consumer spending was a key reason growth, as measured by the gross domestic product, slowed to an annual rate of just 0.7 percent, the poorest performance in three years. Economists believe growth will bounce back in the current April-June period, helped by continued strong job gains, rising wages and increased consumer confidence. Many analysts are looking for a second quarter surge to growth of 3 percent or better and they are forecasting growth for the entire year of around 2.3 percent, up from 1.6 percent GDP growth in 2016, the poorest showing in five years.
Trump promised during the campaign to double economic growth to 4 percent or better through a combination of tax cuts for individuals and businesses, deregulation and tougher enforcement of America's trade deals. But economists believe that Trump's growth goal will be hard to achieve given the headwinds the economy faces, with an aging workforce and scant gains in recent productivity. A key inflation gauge closely watched by the Federal Reserve showed a 0.2 percent decline in March while core inflation, which excludes food and energy, fell 0.1 percent, the first decline since September 2001. For the 12 months ending in March, core inflation has risen 1.6 percent, down from a 1.8 percent increase in February. That performance represented a small setback for the Fed's goal of getting inflation back to annual increases of 2 percent.