US consumer spending is still holding up, but inflation pressure is narrowing the Fed’s room to ease
📌 US consumer spending rose 0.4% in January 2026, slightly above forecasts and showing that household demand has not clearly weakened yet. This remains an important support for the economy, as consumption still accounts for most of overall growth.
💡 The more difficult part lies in core PCE inflation, which rose another 0.4% month over month and reached 3.1% year over year, the highest level since March 2024. That suggests price pressure is still proving sticky, even as headline PCE eased slightly to 2.8%.
⚠️ The broader picture is therefore becoming less comfortable as the growth backdrop has already softened, with Q4 2025 GDP revised down to 0.7%. In other words, the US economy has not cracked on the demand side yet, but the foundation underneath is no longer as solid as before.
🔎 What stands out is that this data mainly reflects the period before the energy shock from the Iran conflict fully fed into the economy. If oil and gasoline prices remain elevated into Q2, the Fed will face an even harder balancing act between inflation and growth.