Name: US Consumer Spending Stalls, GDP Takes a Hit
Uploaded: 2026-03-13T21:32:14.000Z
Duration: 6 min
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Past simple

Consumer spending, real personal spending barely rose in January, up 0.1% as Americans cut back on goods and focused on essentials like health care.

Core inflation increased 0.4% on the month, 3.1% from a year earlier.

This is the one that they need to get down to 2% per their own goals, but

haven't been able to for many, many years.

We bring in Mike McKee, Bloomberg's international economics and policy correspondent.

These are a group of really intelligent, accomplished, capable men and women who have a target that they haven't been able to hit for five years.

Far be it for me to give them advice because there's no open seats on the board.

And so even if I'm right, I'm not going to get a job there.

Yeah, They've been hit by a number of shocks.

Obviously the initial shock was the pandemic and it sent oil prices up and energy prices up.

And then we had an energy shock there that we're having again now.

But we also had the tariffs come in and that's played a big role.

We are seeing a little bit of better news in that the headline number did come down a tick to 2.8% from 2.9, but

as Matt said, the core up 3.1% during the month.

Spending was weak, but okay, up 4.10of a percent.

The good, the good news in this report was wages and salaries were up half a percent after being up just 1.10of a percent in December.

Now, what I just said there is important December and January.

less relevant because all of this is before the war, so we don't have any impact of that in this data.

Another thing that caught everybody's attention today was GDP halving, going to 7.10 of a percent in the fourth quarter from 1.4%.

Consumer spending much weaker than thought.

Business spending much weaker than thought.

Real final sales, which is another perhaps better way sometimes of looking at this than GDP because it leaves out inventories and trade falls to 4.10of a percent from 1.2%.

We also had a durable goods orders for January report that showed defense military aircraft orders were down 23.7%.

You'd think that they might have thought of ordering more when they were planning all this.

That maybe says something within itself by the way I want to bring back up that screen you had showing PC because of all the decimal points.

I feel like we shouldn't let this go unnoticed because for January 0.363.

So I guess a softer result when you take it all the way out to the.

We're looking at all the decimal back to try to figure out how soft it is back to decimal points because of the rounding is important.

Important is the rounding that sent us up to 3.1%.

And so, you know, the Fed has to pay attention to how much the month over month has actually changed.

And unfortunately it doesn't change by much.

Mike, I just constantly worry, especially given what GDP did and that inflation is still sticky.

If we're getting to a point where the inflation coming from the war is bad enough, we even are contemplating a hike, wouldn't that assume that growth is taking a really big hit too, that this isn't the energy shock of 2022?

Well, interestingly enough, the yield curve has flattened.

And the reason it's flattened even though we are expecting more inflation is that bond traders are beginning to price in the idea of a real economic slowdown.

So that's why the long end has been coming down.

The short end has just basically stayed where it is because nobody thinks we're going to be cutting rates anymore.

The markets has priced out the idea of any rate cuts for 2026.

And if you look far enough out, 2000 end of 2027, they're pricing in a rate increase.

Now, there's not going to be any statistical validity to that, but

it's an interesting turnaround from where we were, where it was just a straight line down for why not, why not increase rates now?

I mean, if you are shown data that you're still 50% above your target five years into the campaign you've waged against inflation, why not do something you're definitely not getting on the board?

No, I'm just saying, like, I mean, I mean, we're still looking at unemployment.

I don't think the President wants anybody who raising rates.

One is that we don't know what is going to happen.

If the economy is going to weaken significantly because of all of what's going on, then you don't want to be raising rates because that's just going to put an extra weight on the scale on that side.

But at the same time, there are two camps.

And the question is, do you think that where the Fed is now is high enough to continue putting pressure on it, on the inflation rate and bring it down?

That's where the hawks are at the moment, because nobody's talking about rate increases.

The doves think that we're too tight and the economy is going to suffer from that.

And so that's the debate that's going to have to play out.

I like it for a moment, you know, because at some point I want to be able to take our officials at their word that they really are aiming at that target.

You know, we're having that debate in Europe.

ECB starting to get hikes priced in, as is the body.

So not completely crazy to ask the question of why not the U.S.

well, Japan we knew is raising rates, but

Australia, I was looking at this morning there also, it's priced in for rate increases.

So the rest of the world in a kind of a different position because they don't have all the oil that we have.

So the impact on them is going to be much worse with inflation.