Don’t Look Now, But the Economy’s Kinda … Booming

Say, weren’t we supposed to fall into the Tariff Apocalypse this month? See runaway inflation? According to the Chicken Littles, the consumers were poised to flee the consumer-driven economy as a trade war ravaged Middle America.

Looks like consumers missed the memo on the Tariff Apocalypse. After a hiccup on Liberation Day, the economic indicators all trend in the right direction this month. For example, the runaway inflation not only failed to show, inflation has actually gone down the last three months, including Liberation Month. Today’s PCE Index report shows the best month for consumers on prices in months. At the same time, personal disposable income soared:

🚨Personal income is UP!

Democrats were screeching about the economy crashing, but it’s IMPROVING for the average American.

Golden Age! pic.twitter.com/NpWGmLIUOw

— Townhall.com (@townhallcom) May 30, 2025

Personal income increased $210.1 billion (0.8 percent at a monthly rate) in April, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI)—personal income less personal current taxes—increased $189.4 billion (0.8 percent) and personal consumption expenditures (PCE) increased $47.8 billion (0.2 percent).

Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $48.6 billion in April. Personal saving was $1.12 trillion in April and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.9 percent.

In case anyone needs a visualization of this data in relation to the past year, the Bureau of Economic Analysis provides this chart:

It’s worth pointing out that consumers may have been a little spooked in April. The PCE increase was minimal relative to the previous six months, although it still outdid January’s small negative dip. That may be why the savings rate accelerated in April to 4.9%, too. Consumption didn’t come to a halt, though, and it’s likely rebounding in May, especially if that represents any pent-up demand. 

Another positive indicator needs a little context too. The Census Bureau reported a sharp drop in imports in April, giving us the lowest monthly trade deficit in years:

Goods imports fell by 20% to $276.1 billion, while exports rose 3.4% to $188.5 billion, the Commerce Department said.

It was the biggest one-month drop in goods imports on record.

That yielded a goods trade deficit of $87.6 billion, down from $162.3 billion in March.

Yes, but. The reason imports fell so sharply in April is that importers front-loaded goods in the previous three months. I warned about this a month ago when the Q1 GDP report came back as slightly negative (0.3% annualized). The US experienced an increase of imports more than 40% over the previous quarter, an unheard-of spike that anticipated the coming tariffs that Trump imposed on April 2. It took at least four full points off the final real GDP score (the BEA scored it as closer to five full points, masking a strong result in Q1. 

Having moved all that import activity to Q1 means that we will see much lower amounts of that activity for the next few months, perhaps most of the year. That doesn’t mean that we have solved the trade deficit with the tariffs; we just paid for those imports in an earlier reporting period. And even with that in mind plus the application of global tariffs in April, our trade deficit is still pretty large. 

However, that’s more of a caution against irrational exuberance than a warning of doom, such as the media has been touting for the last two months. The overall outlook is remarkably sunny, and even consumers who held back in April seem cheered up now, as the consumer confidence report earlier this week suggests:

The Conference Board’s Consumer Confidence Index leaped to 98.0, a 12.3-point increase from April and much better than the Dow Jones consensus estimate for 86.0.

Much of the positive sentiment, according to board officials, came from developments in the U.S.-China trade impasse, most notably President Donald Trump’s halting of the most severe tariffs on May 12.

“The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,” said Stephanie Guichard, the Conference Board’s senior economist for global indicators.

May’s rebound followed five straight months of declines. Consumers and investors had grown sour on economic prospects amid the intensifying trade war that Trump has launched against U.S. global trading partners, with China a particular target.

Again, that suggests that we will see PCE activity jump in May and June after a less-dynamic but still positive April. That bodes well for the Q2 GDP report we will see in late July. And it makes clear that we have a very strong economy despite some of the turbulence around “Liberation Day,” and that most Americans realize it despite the steady diet of Chicken Littleism coming from the Protection Racket Media.