Consumer spending in 2025 reflects a cautious yet resilient U.S. household sector balancing steady employment gains with persistent cost-of-living concerns. While aggregate consumption reached $16.4 trillion in Q2 2025—up from $16.3 trillion earlier in the year—growth momentum is expected to moderate to around 2.1% in real terms for the full year, following a 5.7% nominal expansion in 2024. Rising tariffs, higher borrowing costs, and fatigue from sustained price increases have tempered discretionary outlays, even as affluent consumers continue to sustain aggregate demand.

Consumer Sentiment and Confidence

Consumer confidence remains mixed as Americans weigh stable job markets against stubborn inflation and uncertainty around household finances. According to the University of Michigan’s October 2025 survey, the sentiment index stood at 55—essentially unchanged month-over-month, indicating neither renewed optimism nor deeper deterioration. McKinsey’s ConsumerWise survey in Q1 2025 found that 46% of consumers felt optimistic about the economy, supported by low unemployment and steady job growth, but nearly half cited inflation as their top concern. Notably, younger consumers felt financial strain, dipping into savings at higher rates, while higher-income households expressed confidence in their future earnings potential.

Spending Patterns by Income Cohort

Disparities in sentiment have translated directly into divergent spending patterns. Alvarez & Marsal’s Spring 2025 Consumer Survey reported that households earning over $100K maintain a net-positive outlook on spending, while those below that threshold have shifted toward saving and reduced outlays. Lower- and middle-income consumers are tightening budgets across essentials—cutting grocery spending volume and personal care purchases—as they refuse to absorb continued price hikes. Among high-income consumers, discretionary categories such as travel, entertainment, and premium home goods continue to perform above-average, but even these groups show more selective behavior, emphasizing value and experiences over brand loyalty.

Income Cohort	Spending Outlook (6-Month)	Key Category Adjustments
Under $60K	-4.2%	Reduced groceries, apparel, personal care
$60K–$100K	-1.8%	Shifting to private-label and discount channels
Over $100K	+2.9%	Increased travel, dining, premium goods

Category-Level Trends

Spending shifts between goods and services continue to normalize following pandemic distortions. Deloitte estimates durable goods spending will grow 2.9% in 2025, while nondurables and services will rise 2.3% and 1.9%, respectively. Services continue to anchor consumption, particularly travel, health, and entertainment categories, even as consumers lean away from large-ticket durable goods such as appliances and electronics. Inflation fatigue has hit grocery and personal care volumes hardest—the first contraction in four quarters reported by Alvarez & Marsal. Meanwhile, younger consumers (under 35) show modest discretionary resilience, particularly in categories like apparel, technology, and leisure, according to PwC’s Consumer Sentiment Index.

Trade-Down and Value-Seeking Behavior

Across demographics, price sensitivity remains elevated. The “trading down” trend—switching from name brands to private labels—has become mainstream, with 58% of consumers indicating they have changed at least one brand preference to save money. Grocery and personal care aisles show the strongest evidence of this shift, with volume declines offset by growth in club-store and discount-channel revenue. Consumers are more likely to delay or cancel large discretionary purchases, reflecting both caution and a perception that durable prices haven’t fully stabilized. However, higher-income cohorts are expanding spending selectively on experiences, premium travel, and eco-conscious product lines, signaling an enduring polarisation between value-seeking and premium positioning.

E-Commerce Penetration by Category

Online sales remain a bright spot, with U.S. e-commerce penetration forecast to reach 17.1% of total retail spending in 2025, equivalent to roughly $1.3 trillion in online transactions. Categories with above-average online market share include books/media (68%), consumer electronics (56%), and apparel (37%). Food and beverages remain predominantly in-store (6.4% online share), though grocery subscription models continue to expand among urban consumers. The fastest digital growth areas are home furnishings (+12% year-over-year) and health and beauty (+9%), spurred by improved online experience design and targeted loyalty programs.

Category	E-commerce Share (%)	Annual Growth 2025 (%)
Consumer Electronics	56	+8.1
Apparel & Accessories	37	+6.4
Home Furnishings	33	+12.0
Health & Beauty	17	+9.0
Food & Beverage	6	+4.3

2025 Outlook and Strategic Implications

Looking ahead, consumer spending will likely expand at a slower yet stable pace, with real growth of roughly 2%. Tariff-related inflation and elevated interest rates will weigh on durables and housing-related consumption, but services and experiential categories should remain resilient. Executives should expect heightened segmentation in consumer behavior: value-driven markets will reward operational efficiency and pricing flexibility, while affluent and experience-oriented segments call for innovation in personalization, sustainability, and premium positioning.

Strategically, retailers and consumer goods firms entering 2026 should emphasize three priorities: reinforce value through transparent pricing, invest in omnichannel e-commerce integration, and tailor assortments regionally to reflect divergent sentiment across income tiers. The polarization of spending behavior seen in 2025 is not a short-term distortion—it is the new operating baseline for consumer markets.