Recent economic data indicate a decline in discretionary spending on services, contradicting the notion that tariffs have had little impact. Economists from Wells Fargo revised consumer spending estimates significantly lower, revealing a substantial discrepancy between initial and later projections. Consumer spending growth was initially reported at 1.8% but was corrected to just 0.5%. Present trends show a minor decline of 0.3% in discretionary spending on services, raising concerns as such patterns have historically occurred during or just after recessions.
Wells Fargo economists noted that there has been a decline in discretionary spending on services, a trend historically observed during or immediately after recessions.
The economists asserted that there is a 'false narrative' suggesting tariffs have had a benign impact on consumer spending, highlighting revised lower estimates.
Consumer spending data was initially optimistic, showing 1.8% growth, but was later revised to just 0.5%, emphasizing the economic strain from tariffs.
Discretionary spending on goods remains stable, while spending on services dropped 0.3% year-over-year, raising alarms about its historical correlation with recession.
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