Bad news about the US economy spreads quickly, but examples of economic slowdown may be exaggerated.

Consumer spending experienced its first decline in nearly two years in January, and real-time forecasts for economic growth have recently turned negative. The real estate market has had a sluggish start to the year, and the air is filled with uncertainty due to President Trump's fickleness on tariffs.

The latest consumer survey by the Conference Board even showed that the proportion of respondents expecting a recession next year jumped to the highest level in nine months in February.

But the data at the beginning of this year was affected by some temporary factors, such as exceptionally bad weather and wildfires. The fundamental fundamentals remain solid: employers continue to increase employment at a healthy pace, unemployment rates remain low, and wage growth rates remain higher than inflation.

It is true that Americans feel uneasy because of Trump's tariff, but they are not good at predicting future spending behavior.

However, one thing worth noting is that the Federal Reserve has not yet completed its work of reducing inflation to its target level, and the threat of a global trade war triggered by the Trump administration may further push up consumer prices.

Vincent Reinhart, Chief Economist of New York Bank Investment Corporation, said, "Demand is showing some signs of wear and tear, but it has not yet accumulated to a level that poses a significant risk of recession. Inflation remains a top priority

It's too early to worry about a recession now

In January of this year, large areas of the United States experienced severe winter storms; In Southern California, deadly wildfires ravaged communities.

These events may have suppressed economic activity for the month, with economists stating that government data shows a 0.2% decrease in consumer spending and a significant 9.8% drop in housing construction. This has triggered the Atlanta Fed's real-time forecast for economic growth, showing that the US economy will contract significantly by 2.4% in the current quarter.

Blake Gwin, head of US interest rate strategy at Royal Bank of Canada Capital Markets, said, "We only have data from the beginning of this quarter, and over time, the GDP tracker will add new data Therefore, these data may be affected by a significant decline. This will only make things even

St. Louis Fed President Musalem stated in a speech that adverse weather conditions may have been the root cause of shoppers cutting back on spending earlier this year, which is why he still believes that "the prospects for sustained economic growth look good.

He said, "My optimism about economic activity is partly due to the labor market, where conditions remain stable

The US Department of Labor announced last Friday that the US economy added 151000 jobs in February, and the average hourly wage continued to grow faster than inflation. The unemployment rate slightly increased in February, but remained relatively low.

What about the economic anxiety? Federal Reserve Chairman Powell said last Friday that he is not too worried, partly because "emotional data has not been able to predict consumption growth well in recent years

Federal Reserve officials are concerned about inflation, not economic recession

Several Federal Reserve officials have recently noticed signs of economic uncertainty and slowing growth, but none of them have mentioned concerns about an economic recession.

On the contrary, some of them point out that if the tariff dispute between the United States and its three largest trading partners gets out of control, inflation may rise again. Trump imposed additional tariffs on imported goods from major Asian countries and implemented tariffs on imported goods from Canada and Mexico, before suspending the tariffs. The retaliation and tough rhetoric have intensified trade tensions, and this rapid back and forth has dealt a blow to consumers and businesses.

New York Fed President John Williams said last Tuesday, "As far as we know today, given all the uncertainty, I have indeed considered some of the impact of tariffs on inflation and prices now, as I believe we will see these effects later this year

Philadelphia Fed President Patrick Harker said last Thursday that price "pressure is building up" and the progress the Fed has made in curbing inflation so far is "at risk".

The Federal Reserve stopped cutting interest rates in January precisely because there was little progress on inflation in the last few months of 2024. The current situation is not yet sufficient for the Federal Reserve to consider reducing borrowing costs again in the short term. Futures trading shows that Wall Street is betting that the Fed will keep interest rates unchanged again later this month.

Lydia Boussour, a senior economist at Ernst&Young, stated in a commentary published last Friday, "Given the clear upward trend in inflation risks and the overall stability of the labor market, we believe that the Federal Reserve, which will respond positively in the coming months, will maintain a wait-and-see attitude and expect to only cut interest rates twice in June and December 2025