Consumers are keeping the economy afloat as businesses scramble on tariffs

The U.S. consumer is holding up pretty well even as businesses scramble to adjust to President Donald Trump’s trade war, economic indicators show. This is helping to support stock prices — especially on days when the president doesn’t mention tariffs.

The S&P 500 and Dow Jones and Nasdaq Composite indexes closed higher on Monday after overall retail sales rebounded by less than expected in February, rising 0.2% from January — but the control group that feeds into GDP topped forecasts with a 1% increase.

By contrast, the New York Fed’s empire manufacturing index fell by almost 26 points to -20 for March, the lowest level since early 2024, while the price measure picked up. Additionally, the NAHB homebuilders index for this month also weakened unexpectedly.

We’re seeing “resilience of economy on consumer side, but weakness on business side as companies deal with tariff issue,” economist Ed Yardeni said on a conference call. While the U.S. economy isn’t definitely heading for a recession, the odds of one have increased.

And while current bear indicators are at a levels that usually signal a screaming buy for stocks — because they prompt the Federal Reserve to cut interest rates — that’s not going to happen at this week’s meeting of the central bank, Yardeni said. Policymakers still remain dovish, however, and may cut later this year, he added.

“Get a neck brace, the volatility will most likely continue,” Yardeni said, adding that he’s not sure that the stock market has hit bottom.

The situation may stabilize after the Trump administration imposes reciprocal tariffs on April 2 — provided that it then negotiates the rates down. If they become a permanent feature, as Trump has insisted they will be, the situation would be different.

Pantheon Macroeconomics sees the elevated risk of much weaker growth as consumers seek to rebuild a savings buffer in response to concerns about job security, keeping to its projection of 75 bps of rate cuts this year.

Treasury Secretary Scott Bessent said Sunday on NBC’s (CMCSA) “Meet the Press” that he he was “not at all” worried about the stock market, calling corrections “healthy.”