Consumers Continue to Favor Necessities amid Rising Prices
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Economic Data & Analysis

Global Economy Briefs

Timely insights from the Economy, Strategy & Finance Center

Rising inflation continues to shift consumer spending habits toward necessities such as groceries and away from discretionary services. In July, consumers were focused on chasing discounts ahead of another round of tariff increases.

Consumers Continue to Favor Necessities amid Rising Prices

August 29, 2025

Rising inflation continues to shift consumer spending habits toward necessities such as groceries and away from discretionary services. In July, consumers were focused on chasing discounts ahead of another round of tariff increases.

Trusted Insights for What’s Ahead®

  • Rising inflation will likely limit how much consumers can spend on goods and services when adjusted for inflation, leading to further deceleration in economic growth in the second half of the year. After modest GDP growth of 1.4% in H1, we estimate the economy will expand at only half that pace in H2.
  • Consumers’ renewed focus on goods over services suggests an effort to front-run tariffs before the new round took effect in August. This is supported by July’s outsized surge in goods imports, according to Census Bureau data, also released this morning.
  • The sharp rise in goods imports is expected to weigh on GDP growth in Q3, with the economy projected to expand by just 0.6% this quarter.
  • July’s Personal Consumption Expenditures (PCE) deflators showed reacceleration in core inflation, which we believe marks the beginning of a trend that will intensify in H2. TCB proj
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Author

Yelena Shulyatyeva

Yelena Shulyatyeva

Senior US Economist

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