Consumers have shopped 'till they dropped

Should we give you the good news or the bad news first?

The good news: Inflation—the persistent, annoying thorn in the side of Americans for the last few years—increased at its slowest pace in four months. The consumer price index (CPI) only rose 0.2% month over month in February, a nice breather after a 0.5% jump in January. Core CPI—which excludes food and energy costs—also came in at 0.2%. Year over year, headline CPI rose 2.8%—lower than the 2.9% economists expected.

But the news isn’t quite as much of a relief as it may seem. President Trump’s heavy-handed tariff policies are expected to be inflationary, and America’s economy is no picture of health right now.

“The relief in risk assets following the CPI release is welcome, but I don’t think the data changes the narrative much,” explained Head of Investment Strategy at JPMorgan Wealth Management Elyse Ausenbaugh in a note today. “Policy uncertainty is in the driver’s seat right now, and the biggest question is whether the cracks in sentiment and expectations indicators feed through to hard data in the quarters ahead.”

All shopped out

The bad news: While consumers have been the ringers propping up the economy over the past few years, shoppers are beginning to crack under the pressure.

The New York Fed said this week that 27.4% of households it surveyed expect their financial situations to worsen in a year, the highest percentage since November 2023.

Don’t forget that American households are drowning in debt. Consumer credit, which includes student loans, auto loans, and credit card debt, jumped to $5 trillion in January, according to the Federal Reserve’s G.19 consumer credit report released last week.

On top of that, big box retailers expect consumer sentiment to wane—hurting their bottom lines. Kohl’s shares plunged 20% yesterday after the retailer projected its revenue will drop 5% to 7% in fiscal 2025. Dick’s Sporting Goods also predicted a rocky 2025 earlier this week, with CEO Ed Stack telling CNBC, “It’s just a bit of an uncertain world out there right now.” Other major retail stocks like Target and Walmart have been punished following grim forecasts of their own.

The silver lining? Slower consumer spending should cause inflation to further decelerate. Plus, shorter lines at Walmart locations across America means more pickle-flavored ice pops for us.—LB