
(Image Credit: IMAGN) Tammy Nickerson of Leslie and her service dog Nala shop at the Meijer in Mason, Tuesday, Feb. 25, 2025. Nickerson, a double-amputee, relies on Nala to help her with daily tasks, and seek help if she falls or finds herself in danger.
United States – U.S. consumers are pulling back on spending, and sentiment is declining as tariffs and market volatility under President Donald Trump threaten to undermine one of the key drivers of the country’s economy.
While many retailers saw solid sales at the end of last year, their warnings of slower growth in 2025 are proving accurate. Foot traffic to U.S. stores fell 4.3% year over year in early March, according to RetailNext, extending a decline that began at the start of the year. Similarly, Placer.ai data shows fewer visits to major retailers such as Walmart, Target, and Best Buy in recent weeks.
On Friday, the University of Michigan’s consumer sentiment index recorded its third consecutive monthly drop, hitting its lowest level since November 2022. Rising inflation expectations further fueled concerns about economic stability.
Trump has refused to rule out the possibility of a recession, while the recent stock market decline has reduced the investment portfolios of wealthier Americans who play a significant role in driving consumption.
“The consumer is being barraged with so many different elements,” said Marshal Cohen, chief retail analyst at Circana. “It’s easier for the consumer to just step back and say: ‘I’m going to ride this out and wait and see what happens.’”
The Federal Reserve is expected to hold interest rates steady at its meeting this week. Fed Chair Jay Powell has downplayed concerns about slowing growth, emphasizing that the central bank does “not need to be in a hurry” to cut rates. However, investors worry that Trump’s unpredictable policymaking and sudden reversals are disrupting businesses and dampening economic growth. Wall Street’s benchmark S&P 500 index recently fell into correction territory before making a slight recovery.
Consumer spending has been a key driver of the U.S. economy, particularly in the recovery from the COVID-19 pandemic. However, rising inflation has stretched household budgets, leading to spending cutbacks. Sales of discretionary general merchandise fell 3% in the week ending March 8 compared to last year, according to Circana data.
Fast-food restaurant traffic declined 2.8% in February, with breakfast visits dropping by double digits, according to Revenue Management Solutions. “It’s the easiest meal to make at home or skip entirely,” the consultancy noted. Additionally, four major U.S. airlines warned of a slowdown in demand, partly due to a pullback by leisure travelers.
This month, Target reported a sales decline for February and warned of profit pressures this quarter, citing “tariff uncertainty.” Some consumers are also boycotting the retailer after it retreated from corporate diversity commitments, though analysts say economic concerns are having a bigger impact on sales.
Official government data on Monday showed that headline retail sales rose 0.2% in February, rebounding from a 1.2% drop in January but falling short of the 0.6% increase expected by economists.
Despite the cautious outlook, some executives maintain a measured perspective. Lauren Hobart, CEO of Dick’s Sporting Goods, told analysts last week that it was “absolutely not the case” that consumers were fundamentally weaker. However, the company projects same-store sales growth of 1-3% in 2025, significantly lower than its 5.2% increase in 2024.
“Our guidance merely reflects the fact that there’s so much uncertainty in the world today—in the geopolitical environment, the macroeconomic environment,” Hobart said. “We are just being appropriately cautious.”
Although inflation has pressured U.S. consumers for months, their concerns have not always translated into lower spending. The nearly $1 trillion in holiday sales last year exceeded expectations.
“Consumers are saying they do intend to pull back,” said Tom Kilroy, a senior partner at McKinsey. “But what we’ve also seen over the last year is that they haven’t always followed up that intention with action.”