WASHINGTON (AP) — A closely watched inflation gauge cooled last month in a sign that prices were steadily easing before most of President Donald Trump’s tariffs were implemented.

At the same time, consumers accelerated their spending, particularly on cars, likely in an effort to get ahead of the duties.

Wednesday’s report from the Commerce Department showed that consumer prices rose just 2.3% in March from a year earlier, down from 2.7% in February. Excluding the volatile food and energy categories, core prices rose 2.6% compared with a year ago, below February’s 3%. Economists track core prices because they typically provide a better read on where inflation is headed.

The slowdown in inflation could be a temporary respite until the widespread duties imposed by Trump begin to push up prices in many categories. Most economists expect inflation to start picking up in the coming months.

“Core inflation will inevitably rebound sharply in the coming months,” Harry Chambers, assistant economist at Capital Economics, said in an email. “Goods prices will rise much more strongly.”

Chambers expects core inflation will near 4% by late this year.

Wednesday’s report also showed that consumer spending increased 0.7% from February to March, a healthy gain. Much of the increase appeared to be driven by efforts to get ahead of duties, such as Trump’s 25% duty on imported cars, which took effect April 3. Spending on autos surged 8.1% in March. Still, that means auto sales are likely to fade in the coming months because those assets have already been secured.

But spending on restaurants and hotels also jumped after falling in February, a sign Americans are still willing to splurge a little on travel and dining out.

The spending increase is noteworthy because consumer confidence surveys have plunged for several months, suggesting Americans have grown increasingly worried about the economy. Yet so far, that hasn’t translated into a noticeable slowdown in spending.

Yet many economists expect it will come soon. Some businesses are already seeing it, including some airlines.

And Sheryl Tubbs, an Idaho-based creator behind DenimFelt, which converts secondhand denim into stuffed animals and puppets, opened her Etsy shop in late 2019 as a way to supplement her husband’s income. She buys supplies like boxes, buttons and thread from Chinese sellers on Amazon and benefited from the fact that small shipments from overseas have been exempt from tariffs, under what’s known as the “ Minimis exemption.” But the Trump administration has now closed that loophole.

Prices for the supplies she buys from China are already rising. On top of that, sales dropped 50% over the past month as her customers pulled back. She will have to raise prices by a dollar or two on her items, which average about $50. But she’s also coming up with new ways to market her business like selling at a local festival and digitizing her patterns so she can sell them.

“I definitely have to be more creative and come up with better ways of doing it to compete,” she said.

Earlier Wednesday, the government reported that consumer spending slowed in the first three months of the year, compared with last year’s final quarter, as bad weather depressed shopping and Americans took a breather after healthy spending over the winter holidays.

The nation’s economy actually shrank 0.3% in the January-March quarter as imports surged as companies sought to get ahead of Trump’s tariffs.

Trump benefited in last year’s election from broad dissatisfaction among voters about the steep rise in prices that began in 2021 and that, on average, pushed prices up about 25% by the middle of last year. Grocery costs shot up nearly 30%. As a candidate, Trump said he would immediately lower prices if elected.

Yet the president has slapped 25% duties on steel and aluminum, as well as carsand a 10% tariff on nearly all other imports. And China, the United States’ third-largest trading partner, now faces a 145% duty on its exports.

The inflation-fighters at the Federal Reserve target a 2% inflation rate and pay close attention to Wednesday’s inflation gauge, known as the personal consumption expenditures price index. The better-known consumer price index was released earlier this month and also showed a steady decline.

Inflation figures were revised higher for January and February, leaving price increases in the first quarter higher than previously estimated. The higher figures would likely leave Fed officials wary of cutting rates soon even before taking tariffs into account.

Trump has pushed the Fed to cut its key short-term interest rate because inflation has cooled. But Fed Chair Jerome Powell has underscored that the central bank is likely to remain on the sidelines as officials gauge how tariffs will impact the economy. The Fed isn’t expected to lower its rate at its policy meeting next week.

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AP Retail Writer Anne D’Innocenzio contributed to this story from New York.

Wednesday morning, we learned that the U.S. economy contracted slightly in the first quarter of 2025. Real gross domestic product was down 0.3%a minor contraction but a large step down from the prior quarter’s GDP growth rate of 2.4%.

The negative impact of the tariffs, in particular, comes through clearly in the report.

Ever since President Donald Trump launched his trade war and his attacks on Federal Reserve independenceall accompanied by chaotic policy lurching, surveys of consumers and businesses have shown sharp drop-offs in confidence and sharp increases in expectations of higher inflation. Financial markets, of course, have been battered about, rising when the administration dials back the tariffs and vice versa. We’ve all been on some degree of pins and needleswaiting to see whether another self-inflicted wound is incoming.But for all that angst, until today, we didn’t see much impact of the president’s actions in the so-called hard data, meaning the numbers we get about the economy’s performance from the statistical agencies.

That’s why this GDP report is so important. The negative impact of the tariffs, in particular, comes through clearly in the report, which shows data only from January to March. So the report isn’t even reflecting the long list of “reciprocal tariffs,” currently on pause, that were announced on April 2.

One number from the GDP report embodies this impact: The trade balance took a huge dive in Q1, subtracting 4.8 percentage points from the growth rate. In a data series that goes all the way back to 1947, we’ve never seen a larger negative impact from trade in one quarter.

OK, that’s dramatic. But what does it mean?

There’s no mystery here. It means that consumers and businesses got very busy in January through March trying to front-run the tariffs, pulling forward spending that they normally would have spread across the year. In fact, we saw this coming. An earlier release of retail sales for March showed car and truck purchases getting a big bounce.And it’s not just imports. People and businesses are reasonably worried that tariffs will boost prices of domestic goods, which, as I’ve stressed on this pageoften include imported parts. Business equipment investment, including computers and software, was a bright spot in the report, up over 22%. But if those purchases were also pulled forward — and given the large spike in inventories, this appears to be the case — it implies that future quarters could come in even weaker. More spending now, less spending later.

Does this mean we’re in a recession? Definitely not. One bad quarter doesn’t make a new trend. The import spike (a historically large negative) and the inventory spike (a large positive) are based on incomplete data that will be fleshed out more in coming months. And while consumer spending slowed to 1.8% in Q1 of 2025 from a much stronger 4% in Q4 of 2024, that’s still a decent growth rate for this key GDP component, enough to keep the economy above stall speed.

We’ve all been on some degree of pins and needles, waiting to see whether another self-inflicted wound is incoming.

But this is a worrisome report. It syncs up all too well with what we’ve been hearing about how folks are feeling about the Trump economy, which is now polling underwater. It shows that Americans are highly attuned to, and quite well-informed about, the impact of the trade war on their living standards and are trying to get ahead of it.It also shows something else. I’ve been tracking these reports for decades now, and I’ve gotten pretty good at sniffing out what’s signal and what’s noise. And I can still feel a pulse, a pretty strong one, in the U.S. macroeconomy. The Trumpian chaos has clearly taken a toll on growth, as that topline minus-0.3% shows. But the chaos hasn’t yet broken the fundamentals. The job market’s still pretty robust; even with new inflationary pressures, real wage growth is still up.

If the administration were to stop now, to declare victory in the trade war (there’d be no actual victory, but when has that mattered to Trump?) and to send a clear message, one that they actually stick to, that they’re not going to reverse course tomorrow, there’s still time to dig out of the mess it has put us in. The hole isn’t yet too deep.

But I fear it won’t do so, and if I’m right, then we will likely remember this report as one of the first examples of the hard data starting to look just as bad as the soft data.

Jared Bernstein

Jared Bernstein was chair of President Joe Biden’s Council of Economic Advisers.

President Donald Trump’s plans to offer tariff relief to various industries being harmed by his haphazard and destructive trade war seems like overwhelming proof that this was a disastrous, ill-conceived idea from the beginning.

The Trump administration has floated the idea of offering farmers subsidies (essentially, government welfare being proposed by the purportedly anti-welfare party) to help them cope with rising costs and foreign nations pulling back on purchasing American-made goods. And on Tuesday, Trump signed two executive orders shielding automakers from some tariffs and allowing them to apply for relief over the next two years — although some experts say that won’t be long enough. Trump also exempted some electronic devices from tariffs earlier this month, though his administration says those exemptions will only be temporary.

It’s as if Trump has blown several holes in the U.S. economy and he’s trying to plug them all with his fingers to stop it from leaking out.

It’s as if Trump has blown several holes in the U.S. economy and he’s trying to plug them all with his fingers to stop it from leaking out. And his varying justifications for why the tariffs are supposedly necessary means there’s no telling when this trade war against the rest of the world will end.

For example, Trump has claimed that tariffs — at least on China, Mexico and Canada — were about stemming the flow of fentanyl into the United States. He has absurdly said that tariffs are about raising revenue to replace the federal income tax. And he has argued that tariffs are about bringing manufacturing back to the United States in a sizable way — even though economists say they will do no such thing.

And all of these justifications appear meaningless at the moment, given that the tariffs don’t seem to be forcing countries into the quick negotiations the president and his Cabinet have said would arise. Trump promised that dozens of trade deals would come to fruition before his 90-day pause on tariffs comes to a close, and, as of this writing, not a single one has been announced.

Meanwhile, some experts expect to see the worst impacts in the months ahead. Things clearly aren’t going as the Trump administration had anticipated, and the fact the president is offering relief (however insufficient) from the pain he is single-handedly inflicting on American businesses is a sure sign of that.

Ja’han Jones

Ja’han Jones is an BLN opinion blogger. He previously wrote The ReidOut Blog. He is a futurist and multimedia producer focused on culture and politics. His previous projects include “Black Hair Defined” and the “Black Obituary Project.”