Consumer Spending in 2025: Resilient, But Cautious Optimism

As we navigate through 2025, consumer spending remains unexpectedly resilient amid a complex economic landscape. Although predictions earlier in the year warned of potential slowdowns and recessionary signals, recent data and behavioral trends suggest that consumers are still opening their wallets. In this post, I’ll break down the latest US and global consumer spending trends, highlight key shifts, and explore what’s driving — and tempering — the enduring strength of consumer demand.

Growth: Slower, But Still Moving Forward

US consumer spending is projected to rise about 2–3% this year. While this pace is softer than last year’s rapid climb, it’s still well above what would signal an economic downturn. Especially in the first quarter, spending growth was healthy as households tapped into accumulated savings and made purchases ahead of anticipated tariff hikes.

However, economists note several headwinds:

• A cooling labor market is beginning to affect appetites for discretionary purchases.
• Inflation and policy uncertainty, especially around tariffs, is nudging consumers to become more price-sensitive.
• The housing market remains relatively flat, and mixed signals from credit markets suggest growing caution, with delinquency rates ticking up but defaults still contained.

Even with these challenges, consumer balance sheets are in comparatively good shape and affluent households, in particular, are buoying overall demand.

Experience Over Possessions: The Shift in Priorities

One of the most notable changes in 2025: Americans increasingly prefer spending on experiences rather than material goods. Recent data shows that 58% of US consumers would rather allocate funds to memorable events, travel, or dining out, even as economic jitters persist. This reflects a broader cultural shift, especially among Millennials and Gen Z, who are entering peak earning years and driving spending activity.

Retailers and service providers, take note: Promoting experiences and events may be as important, if not more so, than pushing physical products.

The Surge of Sustainability

Sustainability is no longer a niche concern. This year, more than half of all consumers are willing to pay extra for eco-friendly goods and services. Urban shoppers, Millennials, and Gen Z continue to lead this green movement. Brands that transparently showcase sustainable sourcing and ethical production are winning loyalty in an environment where environmental impact is as important as price for many.

Yet not all behaviors are uniform. While demand for secondhand goods has dipped from previous highs, expectations for businesses to take sustainability seriously remain unwavering. In fact, almost half of consumers wish companies would prioritize eco-friendly practices — making sustainability a central feature for those aiming to stand out in today’s marketplace.

Trading Down: Savvy Shopping Rules the Day

Even as optimism lingers, there’s still an unmistakable theme of “trading down” across all income brackets. High food prices, for instance, have led consumers — especially those with lower incomes — to opt for cheaper cuts of meat, more private-label groceries, and carefully considered pack sizes. Even affluent shoppers are hunting for greater value in packaged foods, turning away from premium brands more often than last year.

This shift isn’t limited to groceries. Big-ticket items such as garden furniture, home exercise equipment, and gaming consoles have seen sales decline as buyers postpone or rethink major purchases.

For businesses, responding with affordability, flexible payment plans, and clear value messaging is essential. Highlighting long-term savings and durable product features helps ease anxieties for cost-conscious shoppers.

The Rise of “Buy Now, Pay Later”

Flexible payment services are becoming a vital piece of the retail landscape. About 8% of American consumers now use “Buy Now, Pay Later” (BNPL) platforms, with Millennials and Gen Z especially embracing interest-free payment options. Retailers promoting BNPL at checkout are seeing higher conversion rates and larger average orders, appealing directly to budget-minded and tech-savvy audiences.

Demographic Nuances: Millennials & Boomers Diverge

Millennials and Gen Z are spending more year-over-year, thanks to steady employment gains and a preference for experiences and sustainability. Baby Boomers, on the other hand, remain more concerned about inflation — particularly in the wake of outsized holiday spending — and are less likely to report a desire to splurge. Overall, intentions to trade down, economize, and stick to tried-and-true brands are increasing, especially among older generations.

In groceries, low-income households are most likely to shift purchases toward budget brands or reduce quantities, but even wealthier households are adjusting habits as food prices climb.

What Should Businesses Do Now?

• Make sustainability and value central to your messaging; consumers want durable, eco-friendly goods and transparent practices.
• Offer flexible payment methods that help buyers manage budgets and reduce friction at checkout.
• Lean into experience-driven marketing, focusing on events, travel, or personalized services over product accumulation.
• Monitor shifting attitudes across demographics and respond with targeted offers — Millennials and Gen Z want flexibility and experiences, while Boomers prioritize price and reliability.

Key Takeaway:

Despite economic uncertainties, there’s no recession on the horizon — at least for now. The American consumer remains robust but increasingly pragmatic, seeking value, environmental responsibility, and memorable experiences. For brands and retailers, those who adapt quickly to these nuanced shifts won’t just weather 2025; they’ll thrive in it.