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US shoppers are cutting back on spending and sentiment is sliding as President Donald Trump’s tariffs and market volatility threaten to undermine one of the key drivers of the world’s largest economy.
Many retailers reported solid sales at the end of last year, but warned of slower growth in 2025, and industry data shows that their forecasts are already playing out.
Footfall to US stores fell by 4.3 per cent year on year in early March, according to RetailNext, a consultancy — extending declines that began at the start of the year. Placer.ai, which aggregates signals from consumers’ mobile devices, has recorded fewer visits to big-box stores including Walmart, Target and Best Buy in recent weeks.
On Friday the University of Michigan’s consumer sentiment index recorded its third consecutive monthly drop and the lowest reading since November 2022. Inflation expectations were rising, the survey also showed.
Trump has declined to rule out a recession, while the stock market’s recent tumble has dented the investment portfolios of wealthier Americans who propel US consumption.
“The consumer is being barraged with so many different elements,” said Marshal Cohen, chief retail analyst at Circana, which compiles retail purchase data. “It’s easier for the consumer to just step back and say: ‘I’m going to ride this out and wait and see what happens’.”
The US Federal Reserve is expected to keep interest rates on hold at its meeting this week, and Fed chair Jay Powell recently downplayed concerns about growth, saying that the US central bank did “not need to be in a hurry” to cut rates.
But investors are increasingly concerned that Trump’s erratic policymaking, marked by a series of sudden U-turns, is disrupting businesses and slowing growth. Wall Street’s benchmark S&P 500 stock index fell into correction territory this week, before inching back.
Consumer spending was a key driver of the US’s economic recovery from the Covid-19 pandemic, outpacing Europe and other big economies.
But household budgets were stretched in the subsequent period of high inflation. In response, consumers have pared spending, cutting sales volumes for consumer packaged goods companies. Lower-income consumers have felt the most strain.
Sales of discretionary general merchandise fell by 3 per cent in the week ending March 8 compared with last year, continuing a string of annual declines in February, data from Circana showed.
Traffic to US fast-food restaurants was down 2.8 per cent in February, according to Revenue Management Solutions, with visits at breakfast time dropping by double digits. “It’s the easiest meal to make at home or skip entirely,” the consultancy said.
Four big US airlines this week warned of a slowdown in demand, in part due to retrenchment by leisure travellers.
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This month Target reported a decline in February sales and warned of profit pressures this quarter in part due to “tariff uncertainty”.
Some consumers are also boycotting the Minneapolis-based retailer after it retreated from corporate diversity commitments. Target executives declined to confirm whether boycotts were having an effect.
Analysts said that economic anxiety was having a bigger impact than boycotts on retail sales, for which official government data is due to be released on Monday.
Lauren Hobart, chief executive of Dick’s Sporting Goods, told analysts this week it was “absolutely not the case” that consumers were weaker. However, her chain forecasts same-store sales growth of 1 to 3 per cent this year, slower than its 5.2 per cent rise in 2024.
“Our guidance merely reflects the fact that there’s so much uncertainty in the world today in the geopolitical environment, the macroeconomic environment. We are just being appropriately cautious,” Hobart said.
While inflation has weighed on US consumers for months, their anxiety has not always translated into lower spending. The nearly $1tn in sales during last year’s holiday shopping season surpassed expectations.
“Consumers are saying they do intend to pull back,” Tom Kilroy, a senior partner at McKinsey, told an industry conference in New York this week. “But what we’ve also seen over the last year is that they haven’t always followed up that intention with action.”
