LIVE MARKETS-Has buying ahead of tariffs run its course?

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HAS BUYING AHEAD OF TARIFFS RUN ITS COURSE?

Consumer spending showed signs of moderating in April and Bank of America' aggregated credit and debit card data also shows that while there was evidence of "buying ahead" due to concerns about tariffs, that trend was short-lived.

Bank of America Institute economist Joe Wadford and senior economist David Michael Tinsley wrote that growth eased to 1% y/y in April from 1.1% in March with some early-to-mid April spending strength in durables largely subsiding and easing into mid-May.

The economists said that auto loan applications, its proxy for vehicle purchases, showed vehicles as a "buy ahead" item, but that this was "somewhat normalized through mid-May."

And clothing, even though it is disproportionately affected by tariffs, did not show buying-ahead activity in April nor through mid-May, according to the company.

Through mid-May, durables buying-ahead was led by middle- and higher-income households, except the top 1%, while lower-income households did not participate, potentially because they lacked "funds to make bigger ticket purchases on short notice."

On seasonally adjusted basis, spending was flat month-over-month, they said. And while services spending recovered slightly in April, there was a m/m pullback in retail, excluding gas and restaurants.

So far in May, "consumer spending was flat at the start of the first half of the month, with no YoY increase in the two weeks ending on May 17," as per the research.

Here is a Bank of America Institute graphic based on the bank's internal data:

The card data may suggest that trend for buying upfront to try to avoid tariff-inflated prices "may have largely run its course," according to the economists.

"Given that economic uncertainty remains very high amid the imposition of tariffs and corresponding price increases, we continue to keep a close eye on how the consumer is reacting," they wrote.

(Sinéad Carew)

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