• by Corinne Casagrande , May 9, 2025

We think consumers are tightening spend: People hear whispers of a downturn, pay higher interest rates, and they respond by slowly scaling back "just in case."

Yet we’re having more trouble than ever identifying clear pullbacks. Consumer spending and underlying U.S. macroeconomics remain strong.  Wage growth is outpacing inflation, inflation is easing, and consumer spend grew in March. It’s hard to tell your CEO that sales are down because of macroeconomic conditions when the economic situation looks pretty good in aggregate.

Some marketers think they’re feeling the impact anyway. Lower-income consumers are constrained. Though their confidence is low, we see few indicators of trouble for prime and wealthier consumers. Morgan Stanley did, however, find one sign of strain on prime consumers: a rise in delinquencies for mortgage or car loans. Even high-income households that secured one of these loans after 2022 pay a significantly larger portion of their income to housing costs, crowding out discretionary spending.

What counts as “discretionary” now?

Maybe what we think are pullbacks are actually a realignment of spending priorities. After all, people save less than ever today. At 3.9%, the current saving rate is half the pre-2020 average.  Our “essentials” list got a lot longer in the last decade.  

New “essentials” are more resilient

People spend more time at home than ever (almost two hours more per day compared to 2019). This impacts different categories:

Wellness spending: In past recessions, gym memberships were an easy cut. The format and spending have changed; the monthly Peloton charges or GLP-1 subscription may hold outsized value. Spending on health and wellness is also up $3.6K - $6.7K per year per household, according to BLS.

Entertainment & Streaming Services:Consumers tell us they want fewer media subscriptions, yet they still splurge for multiple services. People may pare down, but not entirely pull back on their near-constant Netflix companions.

Where Value Messaging Should Begin

Travel: The classic discretionary spend category, and now big trips consistently get downsized or postponed. Domestic brands can expect less foreign visitors as the inbound has already slowed in Q1. The Conference Board confirmed in April that people intend to spend less on vacations this year.

Dining out and takeout: Grocery prices have provided their fair share of sticker shock in the past three years, but QSR, fast casual and restaurants were doing well -- not from volume, but because inflation created air cover to allow restaurants to raise prices. When people want to pull back, they say they will eat out less.

We often measure recessions by big headlines: a spike in unemployment, mass layoffs, plunging GDP. But by the time those show up, we’re already in a different economic situation.  Some consumers have been living in their own personal pullback for months. For marketers, industry and interest data (search, survey, competitive) can be more useful to benchmark spending behavior.