The fear that the cold storm that hit the USA the first days of the year is not the only thing that is icy in an economy that until the last quarter of 2024 continued to roar strongly. A known fact this Friday has been a striking crack that has scared some analysts while the confusion caused by the first Donald Trump policies back to the White House threatens to hit the economy in the medium term.
All the attention of analysts and investors was this Friday in the report of the Office of Economic Analysis (BEA) of the US Department of Commerce with the deflator of the expense in personal consumption (PCE), the indicator whose underlying variable (neither food nor energy) is the inflation control guide for the Federal Reserve. For generalized tranquility, the data has been adjusted to the forecasts and fell to 2.6% year -on -year in January. Although it remains far from the objective of 2%, there was panic to an inflationary regrowth after the high consumption price index (CPI) of January that would be added to some more inflationary Trump policies. The ‘scare’ has come on the side of consumption.
In addition to the aforementioned deflator, the BEA report offers a good radiography almost in real time of private consumption, a true engine of the US economy by representing 70% of the gross domestic product (GDP). In January, a bulky decrease of 0.5% of the real expenditure of consumers (Discounting the effect of inflation) compared to -0.1% expected and 0.5% of the previous month. It’s about The worst intermensual reading since the beginning of 2021almost four years ago.
The first explanation that has emerged has been precisely the Extreme winter climate that stopped the activity in the first month of the year, also just after the Christmas spending season. As a symbolic example, the Trump swears As president, it was celebrated, against the usual tradition, inside. However, some analysts have found indications that this downturn was not just a climatic issue.
“Although it is tempting to blame the fall completely to the harsh winter weather conditions last month, the breakdown shows that the expense in some categories typically related to weathersuch as food services and accommodation, had better results“, Lanza Thomas Ryan, economist for North America of Capital Economics in a client note.
“This does not mean that time has not had any impact and we hope that consumption will be recovered this month. Even so, as the fall was greater than we had supposed before the publication, it is a downward risk for our Estimation of the GDP of the first quarter up to 1.5%. Anuced. driven by an increase in social security payments derived from the annual adjustment of the cost of life, “adds the expert.
On February 14, another of the data that measures the state of consumption health already gave the first warning signal. It was the authentic I collapse that they experienced US retail sales in January. The 0.9%drop, the largest in almost two years, greatly surprised, waiting for a contraction only of 0.2%. Although the December data had been reviewed from 0.4%to 0.7%, the coup was notorious and was confirmed in what is known as ‘control group’ within retail sales, which excludes more volatile purchases and fell 0.8%. This data already sent a message that the beginning of 2025 can be weak after the string of data that had been reflecting the US economic strength. The most revealing of all: the increase above 4% annualized (a very strong fact) of private consumption in the last quarter of 2024.
“The sharp fall in retail sales of the control group in January, along with the most appropriate data showing a Vehicle sales collapseThey suggest that real consumption fell last month. Although the meteorological effects are likely to have part of guilt, this weakness suggests, however, that GDP growth will slow down, “they already pointed out from Capital Economics. The hole in vehicles has been found this Friday with the data of the BEA.
Returning to the fall in consumer spending in real terms, James Knightley, Ing chief economist for the US Very important for GDP growth in the first quartersince even if we achieved a rebound of intermensual 0.4% in February and an increase of 0.3% in March, the expenditure of consumers in the US in the first quarter would record an annualized growth of only 1.6%, the weakest since the second quarter of 2023 “.
“We already knew that retail sales had fallen. This may be due to the cold and a marginal impact of the Los Angeles fires, but it was supposed that the spending on services would partially compensate it. In the end it was not so and shows that The US economy began 2025 with a weak base. This suggests that the strong fall in consumer confidence since it reached its maximum point in November, when President Trump won the elections, he may be translating into a cooling of spending, “adds Knightley.
Politics is not helping
At the beginning of the year there was optimism in which the combination of policies of President Trump of soft regulation and tax decrease would boost growth in an economy that already seemed solid. However, As soon as progress has been made in the positive aspects for growth: Fiscal cuts and deregulation. Instead, the Administration has focused on policies that produce negative results, argue from ING: “Government austerity, initiated by Doge (the expense cutting project that is in charge of Elon Musk, CEO of Tesla), is providing restlessness in both the public and private sector for the safety of employment and rights, while households of medium and low income, already in economic come some relief in the form of the lowest prices that were also promised. Tariffs will further increase costs“
Another adverse factor for GDP growth in the first quarter has been the advance of January on the goods of goodswhich showed that the merchandise trade gap increased to a record deficit of 153.3 billion dollars in January, compared to 116.6 billion dollars in December. “This clearly demonstrates that Importers have tried to get ahead of tariffswith an increase in imports of 11.9% intermensual, “Knightley adds.
Imports of industrial supplies went from 67,000 million dollars in December to 89.3 billion in January, while consumer goods imports increased by 6,000 million dollars, up to 78,200 million. “Interestingly, the automobile sector did not move much,” they abound from ing. Exports increased by 2% intermensual, but after a 3.8% drop in December.
“The result of all this is that The market seems to be starting more emphasis on the history of growth That in the history of inflation, with the futures contracts of the Fed funds now valuing at 61 basic points the type cuts of the Fed for this year, compared to the 28 basic points valued just over two weeks ago. This seems too low and, for now, we maintain our forecast of two cuts of types of 25 basic points by 2025 (September and December), with a third cut next March “, they close from the Department of Analysis of the ‘Orange’ Bank ‘.
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