US Consumers Cut Spending In January More Drastically Than At Any Point In The Last Four Years

The drop may raise alarms about whether Americans are growing more cautious amid widespread uncertainty about the economic outlook.

WASHINGTON (AP) — U.S. consumers cut back drastically on spending last month, the most since February 2021, even as inflation declined, though stiff tariffs threatened by the White House could disrupt that progress.

Americans cut their spending by 0.2% in January from the previous month, the Commerce Department said Friday, possibly because of unseasonably cold weather. Yet the retreat may be hinting at more caution by Americans amid rising economic uncertainty.

Inflation declined to 2.5% in January compared with a year earlier, down from 2.6% in December, the government said. Excluding the volatile food and energy categories, core prices dropped to 2.6%, the lowest since June, from 2.8%.

Inflation spiked in 2022 to its highest level in four decades, propelling President Donald Trump to the White House and causing the Federal Reserve to rapidly raise interest rates to tame prices.

Last month’s decline could reassure Fed officials that inflation is still slowly cooling. The Fed prefers Friday’s measure to the more widely-known consumer price index, which rose for the fifth straight month in January to 3%. Friday’s gauge calculates inflation slightly differently: For example, it puts less weight on the costs of housing and used cars.