Every quarter, we ask US consumers how they feel about the economy and how those sentiments might influence their spending. Earlier this spring, following announcements that global trade tariffs could be imposed, both markets and consumers reacted sharply.
We conducted a targeted survey in May to understand how tariffs are shaping consumer concerns and behaviors. What we found was that net sentiment1 dropped 32 percent in May, a nine-percentage-point swing from the previous quarter. While inflation remains consumers’ top concern, tariffs have quickly risen to second place.
Despite news of tentative trade deals, uncertainty and volatility persist in the US market, and consumers may explore a range of personal financial behaviors to protect their pocketbooks.
The following charts showcase the findings from our latest ConsumerWise research.
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In the United States, 43 percent of consumers reported rising prices as their top concern, followed by tariff policies (29 percent). This comes as little surprise, given how much the discussions of global trade have occupied the American media and how engaged with tariff-related news US consumers said they have been (91 percent of consumers in the United States heard about tariffs in the news or discussed the topic with others).
Most consumers surveyed said they either have already changed their spending habits or expect to change them soon in response to tariff announcements—even if the tariffs’ effects have yet to hit store shelves. However, consumer responses varied by generation: Gen Z and millennials were more likely to say they expect to change their spending habits, while baby boomers appeared more resistant to change. One reason for these findings could be that US boomers in our previous surveys were already the least likely to splurge, meaning there could be less impetus for them to change their spending habits in response to greater economic uncertainty.
Consumers who said they expect to change their behaviors often cited traditional trade-down actions, including cutting back spending on nonessential items, purchasing fewer items, or switching to lower-priced brands and products. Again, generational differences emerged in the data: Baby boomers said they were most likely to cut back on nonessential spending (12 percentage points higher than the average response across age groups).
Many of Gen Z’s responses trended in the opposite direction compared with baby boomers. For example, Gen Zers were much more likely to purchase items secondhand in response to tariff news (seven percentage points higher than the average response across age groups), while boomers were much less likely to do so. Gen Zers may need to purchase essential items, such as vehicles, secondhand, as prices for new vehicles may be out of reach for many of them. However, Gen Zers may also be more open to secondhand purchasing in categories such as apparel, even if their budget allows for non-secondhand purchases.
Unsurprisingly, we observed a split between how lower-income and higher-income consumers plan to cut back on their spending. Low-income consumers were the most likely to say they would switch to a lower-priced brand or product (13 percentage points more likely than consumers who report making more than $100,000 a year). This trend was true across generational lines: Wealthier baby boomers were less likely to say they would change their habits, but baby boomers who are financially constrained were more likely to adapt their spending, particularly in nonessential categories.
When we looked at responses by category, 50 percent of consumers said they expect to delay purchasing in discretionary categories, such as electronics, accessories and jewelry, or dining out. Forty percent of consumers said they expect to make no change to spending on essentials, including groceries, vitamins and supplements, and gasoline.
US consumer sentiment has declined sharply in response to tariff-related news, and tariffs emerged as a top concern, second only to inflation, prompting many consumers to make—or at least consider—changes in their spending habits. As uncertainty around trade policy continues, consumers could remain cautious and increasingly selective in their discretionary spending.
To contact us for more information or to read additional insights, check out our ConsumerWise page.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, and Kari Alldredge is a partner in the Minneapolis office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
An update on US consumer sentiment: Is growing uncertainty casting a chill on spending plans?
By Becca Coggins, Christina Adams, and Kari Alldredge
US consumers remained optimistic about the economy at the beginning of the year, but caution around spending persisted. Here’s the latest research from our ConsumerWise team.
In the first quarter of 2025, US consumers reported feeling nearly as optimistic as they did at the end of the previous year. This optimism was buoyed by a robust economy with low unemployment, steady job growth, and stable inflation. However, for US consumers across income groups and generations, spending intentions were down across several discretionary categories. Unlike in early 2024 (when consumers carried their approach to holiday spending into the new year), consumers this year reverted to their typical approach to new-year spending.
The following five charts showcase findings from our latest ConsumerWise survey.
Thanks to stable inflation, low unemployment, and ongoing job growth, a plurality of US consumers (46 percent) felt optimistic in the first quarter of the year. However, not all consumers shared this sentiment. Just over a third of surveyed consumers reported mixed feelings about the economy, and pessimism ticked up slightly from the previous quarter. Despite citing stable inflation as a reason for feeling optimistic, half of consumers also said that rising prices were their biggest worry. Notably, older consumers were more concerned about inflation compared with younger ones.
While the greatest share of consumers felt optimistic about the economy, sentiment around household finances was more mixed. Many Gen Z respondents, for example, felt financial strain, with fewer reporting income gains and more indicating they dipped into their savings at higher rates.
Overall, I’m planning to spend less simply because prices of basic needs like utilities, eggs, food in general, and fresh items have increased. So I’ll probably spend a little less on apparel and other things like shoes, and maybe less on vacations, than I have in the past.
Consumers reported their plans to decrease spending across many discretionary categories. This suggests that even optimistic consumers, in addition to consumers who feel uncertainty and pessimism about the economy, may hold back when it comes to spending.
Even so, consumers’ reported spending intentions were nuanced. Consumers, particularly among Gen X and Gen Z respondents, said they planned to cut back spending on discretionary categories such as apparel, footwear, and electronics, while they planned to increase spending on cruises and international flights compared with the previous quarter. This is in line with seasonal expectations, as many consumers are planning their spring break getaways. Similar to this time last year, consumers across age groups said they planned to increase spending on home improvement and gardening supplies as they prepare for spring.
We spent a lot last year . . . so now we’re buying actual necessities and looking for good deals. We want to be intentional with our money and ensure that our money goes as far as it can possibly go. We need to be able to afford to live in the current economy, which doesn’t seem to be changing. So we need to do our best to tighten our belts.
Overall, trade-down behavior remained consistent and pervasive. Three-quarters of consumers said they traded down in the first quarter of the year (up one percentage point from the end of 2024), though baby boomers and high-income consumers said they traded down less frequently than they did in the previous quarter. It is possible that baby boomers chose to abide by their usual purchasing patterns and brand preferences despite being worried about inflation. Millennials, for their part, were more likely to trade down by adjusting the quantity and pack sizes of their purchases.
Given high food prices, grocery spending was a particularly ripe category for trading down. Indeed, far more low-income households—51 percent compared with 40 percent in the previous quarter—traded down for meat and dairy products as prices soared. Even high-income households made more economical choices in the packaged-food category, opting for lower-priced brands and more private labels, than they did in December.
Intentions to splurge varied by demographic groups. Take baby boomers: Not only were baby boomers across income groups the least likely to splurge (only 20 percent reported an intent to splurge in the first quarter), but even fewer of them reported an intention to splurge in the first quarter of 2025. This could be because they felt they overspent during the holidays. Compare that with millennials: Just over half of millennials across all income groups said they intended to splurge, and significantly more high-income millennials (63 percent) planned to splurge, particularly on travel and jewelry, compared with the previous quarter.
After splurging on several discretionary categories over the holidays, fewer consumers said they planned to splurge in categories such as apparel, footwear, and beauty and personal care products, keeping with seasonal trends. One nonfood category stood out as particularly splurge-worthy: travel. Planning for their spring and summer holidays, more Gen Xers and boomers reported their intention to splurge on travel compared with other age groups and the greatest increase in intention to splurge on travel compared with the previous quarter.
As for food-related splurging, consumers said they planned to splurge most on restaurants and groceries. Still, fewer consumers planned to splurge on these items compared with 2024. This may indicate a shifting mindset among consumers: Since food prices continue to rise, consumers may be allocating a greater portion of their budgets to food spending, which means that these purchases may feel less like splurges and more like the status quo.
We don’t spend a lot of money on other types of entertainment at home, but we enjoy luxury travel at high-end resorts. We use airline and credit card points, so we try to get the most out of our travel. I’m worried about inflation and everyday things costing more, but right now, I don’t think it’s going to affect how we travel.
Optimism might have been the prevailing feeling among US consumers in the first quarter of the year, but spending intentions across demographic groups nevertheless remained mixed. These shifts underscored different priorities across age groups and income levels. As economic data continues to fluctuate—for instance, inflation rose above economists’ expectations in January—consumer players should keep a close eye on whether consumer sentiment and behavior align once again. To contact us for more information or to read additional insights, check out our ConsumerWise page.
To see previous ConsumerWise insights, visit our page of 2024 research.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, and Kari Alldredge is a partner in the Minneapolis office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Braj Bhadauria, Christina Anderson, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
