Consumer Pullback amid Falling Optimism Augurs Growth Slow-down
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Global Economic Outlook

Consumer Pullback amid Falling Optimism Augurs Growth Slow-down

28 February 2025 / Brief

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A sharp pullback in consumer spending in the beginning of the year, despite rising income, corroborates declining consumer confidence and supports our projections for economic growth to slow this year and for the next Fed move to be a rate cut.

A sharp pullback in consumer spending in the beginning of the year, despite rising income, corroborates declining consumer confidence and supports our projections for economic growth to slow this year and for the next Fed move to be a rate cut.

Trusted Insights for What’s Ahead®

  • A broadbased decline in personal spending across both goods and services categories likely reflects growing consumer concerns about their income and employment prospects.
  • Upward revisions to already robust spending in December suggest there was some front-loading of demand that would have occurred in early 2025.  The weakness seen in these January data may be over-stated and spending should recover, at least partially, in the coming months.
  • The PCE price index data, showing receding inflation, provides some relief and if inflation continues to subside should allow the Fed to resume interest rate cuts later this year.

Figure 1. Spending Growth Sharply Slows in Q1

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Sources: Bureau of Economi

Author

Yelena Shulyatyeva

Yelena Shulyatyeva

Senior US Economist

Read BioYelena Shulyatyeva

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