Consumer spending in the U.S. showed weaker-than-expected growth in February, increasing only 0.1%, which was on the lower end of economists' forecasts.
This follows a poor January performance that was largely attributed to bad weather. The core personal consumption expenditures (PCE) price index, which excludes food and energy, rose by 2.8% year-over-year, remaining stubbornly above the Federal Reserve’s 2% target. Additionally, President Trump raised concerns by introducing a new trade tactic, threatening “secondary tariffs” on nations that purchase oil from Venezuela, aiming to further limit Venezuela’s oil trade with other countries. This decision added to his growing list of economic strategies to leverage U.S. power in both foreign and domestic policy.
The volatile stock market, driven by concerns about the escalating trade war, risks damaging one of the U.S.’s primary growth drivers—spending from high-income consumers. This is compounded by existing tariffs already levied on certain U.S. imports from Canada. Further tariffs, which may increase in the coming weeks, could tip Canada’s economy into a recession, especially with retaliatory tariffs from Canada raising prices on imports. This could result in inflation exceeding Canada’s central bank’s upper target of 3%. The broader implications of Trump’s trade measures are still unfolding, with the impact on global markets and economies becoming more evident.
In Europe, the UK saw a rebound in retail sales in early 2025, suggesting that households were beginning to spend the savings they accumulated last year. This spending surge was particularly notable in household goods, which saw a significant rise in demand, alongside jewelry and clothing. Germany experienced a rise in business optimism to its highest point since June 2024, spurred by Chancellor-in-waiting Friedrich Merz’s promise to modernize Germany’s aging infrastructure with billions of euros in spending. Meanwhile, France’s fiscal deficit for 2024 was smaller than expected, allowing the government some breathing room as it continues to work on reducing its national debt.
In Asia, India’s government is reviewing U.S. demands to cut import duties on farm goods and remove trade barriers, while also seeking an exemption from the U.S.’s upcoming tariffs. Australia’s government introduced a surprise tax cut and energy rebates to address rising cost-of-living concerns ahead of the elections. Meanwhile, Singapore’s inflation eased slightly as food and leisure prices cooled, signaling a more stable economic outlook.
In emerging markets, Mexico’s central bank reduced borrowing costs to 9%, marking the second consecutive half-point cut as inflation continued to slow and the country faced the risk of additional U.S. tariffs. Zambia’s economy performed better than expected, driven by a recovery in agriculture and mining, following one of the worst droughts in the country’s history. Globally, several central banks, including those in Norway and Hungary, kept interest rates steady, while Ghana unexpectedly raised rates to combat inflation. These diverse actions reflect the ongoing global efforts to navigate economic challenges, with central banks making critical decisions to either stimulate or contain economic pressures.
In February, the U.S. maintained its annual inflation rate at 2.5%, as reflected in the Personal Consumption Expenditures (PCE) Price Index, according to data released by the Bureau of Economic Analysis.
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