Photo by Nazrin Babashova
When the Commerce Department released April data on consumption, the uptick in reported inflation got most of the attention. While that is big news, there were several other items that were noteworthy.
First, consumption growth was very weak in April, increasing by just 0.1%. That is not necessarily a big deal since it followed two months of rapid growth, and the falloff was mostly attributable to a drop in car purchases after two months of large purchases. Still, consumption is most of the economy, and if it’s not growing at a decent pace, the economy is not growing at a decent pace.
The second point is that fast-food spending is in the doldrums. I have been following fast-food spending as a measure of perceived economic well-being by the bottom 50% of the income distribution. This is based on the assumption that Elon Musk is unlikely to increase his consumption of Big Macs because his latest IPO went well. The changes in spending primarily reflect the spending of those lower down the income ladder. And that picture is not good.
Real spending hit a peak last September and is down 2.0% since then. It has essentially been flat since late 2023. That doesn’t look like people are feeling good about their finances. (Some people have suggested this is an Ozempic effect. That is an interesting possibility that I will have to examine more closely.)
There are a couple of other items in the consumption data worth noting. First, Trump seems to be making great strides in his effort to turn the United States into a “shithole country.” Real spending by foreigners traveling in the United States was down almost 21% from its December 2024 level. It has been rising rapidly in 2024.
The other point is that even though Donald Trump has brought drug prices down by 500%, 600%, or even 1500%, we’re still spending 4.1% more on pharmaceuticals in April of 2026 than we did a year ago. It looks like the maths aren’t mathing.
Anyhow, the overall story is not a great one. The consumption data are consistent with the view that people are not happy with the economy. We are seeing clear effects of Trump’s policies, unfortunately more in foreign travel than in drug spending.
This first appeared on Dean Baker’s Beat the Press blog.