US government is conducting blanket economic policy changes

 
US President Donald Trump on Tuesday will address Congress for the first time in his second term, and he'll do so with an economy that is mostly chugging along, reports CNN.

However, recent data has contained some warning signals that momentum could be slipping at a time when the Trump administration is conducting sweeping - and potentially economy-shifting - policy changes.

The mighty US consumer, shored up by a strong labor market, helped drive steady economic growth throughout 2024. The US entered 2025 on solid enough footing that economists say it could weather some volatility.

Through the fourth quarter of 2024, real gross domestic product (GDP) - the broadest measure of economic output - grew 2.3%.

Still, some bumpy times could be coming sooner than later, according to a closely watched predictor of real GDP growth.

Last week, the Federal Reserve Bank of Atlanta's real-time GDP forecast projected the economy could contract by 2.8%. The negative swing doesn't necessarily signal a recession: It largely reflects a sharper-than-expected pullback in post-holiday consumer spending and a larger inflow of imported goods in advance of tariffs.

It remains to be seen how much further consumers could pull back. Recent sentiment surveys have shown Americans have grown increasingly sour about economic prospects.

Inflation has cooled dramatically since hitting a 40-year high in the summer of 2022; however, the path back to normal has been slow and bumpy. In January, two key inflation gauges (the Consumer Price Index and the Producer Price Index) ran hot, driven higher by fast-rising food and energy prices.

Concern also have heightened in recent weeks about how Trump administration policies, specifically the implementation of steep import tariffs, could raise prices for consumers and businesses as well as reaccelerate inflation.

Still, as it stands now, the underlying data and the Fed's preferred inflation gauge do provide some silver linings and show that the current path still leads to disinflation. The latest Personal Consumption Expenditures price index rose at an annual rate of 2.5%, half of a percentage point above the Fed's 2% target rate. 

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