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Emotions are slipping as US shoppers are cutting spending and President Donald Trump’s tariffs and market volatility threatens to undermine one of the major driving forces of the world’s biggest economy.
Many retailers reported solid sales late last year, but warned that growth in 2025 would be slow, and industry data shows that their forecasts are already unfolding.
Footfalls to U.S. stores fell 4.3% year-on-year in early March, according to consulting firm RetailNext. Placer.ai, which aggregates signals from consumer mobile devices, has recorded fewer visits to major stores such as Walmart, Target and Best Buy in recent weeks.
On Friday, the University of Michigan Consumer Sentiment Index recorded its third consecutive monthly decline and lowest reading comprehension since November 2022. Inflation expectations were rising, according to the survey.
Trump refused to rule out the recession, but the recent downturn in the stock market has dented the investment portfolio of wealthy Americans driving our consumption.
“Consumers are legally struck by so many different factors,” said Cohen Marshal Cohen, chief retail analyst at Circana, who compiles retail purchase data. “It’s easy for consumers to just take a step back and say, ‘Let’s get through this and wait and see what happens.’ ”
The US Federal Reserve is expected to hold interest rates at this week’s meeting, with Chairman Jay Powell recently downplaying concerns about growth and saying the US central bank “doesn’t have to hurry” to cut interest rates.
However, investors are increasingly concerned that Trump’s volatile policymaking, marked by a series of sudden U-turns, will disrupt businesses and slow growth. Wall Street Benchmark S&P 500 Stock Index was categorized into the revised area this week before retreating.
Consumer spending has been a key driver of the US economic recovery from the Covid-19 pandemic, surpassing Europe and other large economies.
However, household finances were extended to the subsequent high inflation period. In response, consumers reduced spending and reduced sales volumes for consumer packaging product companies. Low-income consumers feel the most burdened.
Compared to last year, discretionary general product sales fell by 3% for the week ending March 8th, continuing a series of annual declines in February, Circana data shows.
Traffic to fast food restaurants in the US fell 2.8% in February, with double digits of breakfast visits, according to Revenue Management Solutions. “The easiest meal is to make it at home or skip it completely,” the consultant said.
This week, four large US airlines warned of slowing demand due to cuts from leisure travelers.
This month’s target reported a decline in sales in February, and partially warned of profit pressure this quarter due to “customer uncertainty.”
Some consumers are boycotting Minneapolis-based retailers after retreating from their corporate diversity commitment. Target executives refused to check if the boycott had any effect.
Analysts said economic unrest had a greater impact on retail sales than boycotts, which official government data is expected to be released Monday.
Lauren Hobart, Dick’s CEO of Sporting Goods, told analysts this week that consumers were “absolutely not.” However, her chain is projecting sales growth of 1-3% this year for the same store, slower than the 5.2% increase in 2024.
“Our guidance only reflects the fact that there is so much uncertainty in today’s world in the geopolitical, macroeconomic environment. We’re just being appropriately cautious,” Hobart said.
Inflation has been squeezing US consumers for months, but their anxiety isn’t always translated into low spending. Sales were nearly $10 during last year’s holiday shopping season, exceeding expectations.
McKinsey senior partner Tom Kilroy told an industry conference in New York this week. “But what we saw last year too is that they don’t always act on that intention and follow up.”
