Consumers Stick to Necessities amid Rising Prices

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Economic Data & Analysis

Global Economy Briefs

Timely insights from the Economy, Strategy & Finance Center

Consumers Stick to Necessities amid Rising Prices

July 31, 2025

Rising inflation is shifting consumer spending habits towards necessities, such as groceries, and away from large item purchases, travelling, and fun activities. Wage growth deceleration points to further slowing in consumption in H2.

Trusted Insights for What’s Ahead^®

Rising inflation will likely limit how much consumers will be able to spend on goods and services, leading to material deceleration in economic growth in H2 after a significant slowdown in underlying economic activity in Q2.
A tepid 0.1% m/m (4.8% y/y) increase in wages in salaries in June, the weakest increase in almost a year, will likely limit growth in consumer spending going into back-to-school and holiday shopping season in H2.
In June, the larger 0.3% m/m headline and core PCE deflator prints (vs. 0.2% prior) were a result of the impact of tariffs feeding into inflation. The monthly increases pushed total inflation up to 2.6% (vs upwardly revised 2.4% prior) and left the core inflation unchanged at 2.8% (vs upwardly revised 2.8% prior) on a y/y basis. The TCB estimates inflat

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Author

Yelena Shulyatyeva

Senior US Economist

Read BioYelena Shulyatyeva

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