Consumers cut spending by most in four years last month even as inflation fell

WASHINGTON (AP) — A key price gauge declined last month, a sign that inflation may be cooling.

Yet data released Friday by the Commerce Department also showed that Americans cut their spending last month 0.2% in January from the previous month, likely in part because of unseasonably cold weather. Still, the drop may raise alarms about whether Americans are growing more cautious amid widespread uncertainty about the economic outlook.

Inflation declined to 2.5% in January compared with a year earlier, down from 2.6% in December, the government said. Excluding the volatile food and energy categories, core prices dropped to 2.6%, the lowest since June, from 2.8%.

Inflation spiked in 2022 to its highest level in four decades, propelling President Donald Trump to the White House and causing the Federal Reserve to rapidly raise interest rates to tame prices.