U.S. consumer spending slowed last month. Why’s that? 

U.S. consumer spending data is very important as it shows how the country’s economy is faring. When the latter goes into recession, consumer spending shrinks considerably, while it increases during the robust periods. Moreover, the U.S. Federal Reserve often considers this data while deciding its monetary policy. As a result, traders usually wait for this data to determine the central bank’s course.

In February, U.S. consumer spending rallied. While the increase wasn’t very substantial, it still encouraged investors. The figure soared much more in the prior month, but the forward momentum continued in February. At the same time, inflation slowed, but it’s higher than the Fed’s desired target. Thus, the agency might deliver one more rate hike this year.

Consumer spending jumped by 0.2% last month. That news was welcome because it accounts for more than two-thirds of American economic activity. On Friday, the Commerce Department stated that it revised the figures for January, expecting the spending to soar by 2.0% instead of 1.8%. Meanwhile, analysts had priced in consumer spending to add only 0.3%.

Consumers’ fears contributed to decreased spending

Despite the moderate rise, consumer spending slowed in the last month compared to January. Analysts think that decreased income contributed to that. Most households have a modest income and must be careful will their spending.

Moreover, the sudden collapse of two U.S. regional banks also concerned the citizens. Most of them preferred to save money in case of another economic crisis. At the same time, most banks have tightened their lending standards. That means people have a harder time getting credit. Thus, they must postpone their heftier purchases until they have enough money. The Federal Reserve’s rate hikes aren’t helping. It only makes it harder for citizens to get money from the banks. Some analysts fear that a tightening policy might trigger another economic recession.

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