REUTERS, Washington

US consumer spending fell for the first time in nearly two years in January and the goods trade deficit widened to a record high as businesses front-loaded imports to avoid tariffs, setting up the economy for weak growth or even a contraction this quarter.

While the data from the Commerce Department on Friday also showed a moderation in annual inflation last month, prices showed some stickiness, with fairly solid monthly gains. In addition, President Donald Trump’s administration is ratcheting up tariffs, which economists said would raise prices as businesses pass on the higher costs of imported goods to consumers.

Consumers’ inflation expectations soared in February. The Atlanta Federal Reserve slashed its gross domestic product estimate for the first quarter to show the economy contracting at a 1.5 percent annualised rate from a 2.3 percent growth pace earlier.

Financial markets now expect the Federal Reserve to resume cutting interest rates in June following a pause in January to give policymakers time to assess the economic impact of the administration’s policies.

“The combination of sticky inflation and a potential growth scare, which is evident in this report, will likely present a worrisome monetary policy conundrum for the Fed,” said Olu Sonola, head of US Economic Research at Fitch Ratings.