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Consumer Pessimism, Fears Over Tariffs Could See Retail Sales Slow
Vicki M. Young
5 min read
American consumers are getting more worried.
They aren’t so optimistic anymore, and U.S. retail sales are projected to decelerate slightly in February and March. That’s the conclusion from Coresight Research, based on several key macroeconomic indicators the firm tracks.
“We expect a slight deceleration in retail sales growth for February 2025, with retail sales growing by approximately 3.8 percent year-over-year,” the research firm predicted. “Looking further out, our model predicts a slight deceleration in March and an acceleration in April, with growth remaining in the low- to mid-single-digit percentage range throughout 2025.”
Coresight expects retail sales to peak at 4.8 percent in January 2026, with a 4.1-percent average for 2025. Its prediction model reflect a majority of 12 out of 14 key indicators impacting retail sales positively in the coming months, with two likely impacting retail sales negatively. Those 14 indicators include unemployment rate, labor force participation rate, disposable income per capita, average weekly wages, inflation rate, savings rate and gasoline prices, among other criteria.
Coresight also concluded that despite concerns over inflation, U.S. retail spending remains resilient. It had expected 2024 to be a “transition year” from a weaker, inflation-impacted economy to one of greater resilience amid a backdrop of low inflation and a lowering of interest rates. “That transition has proved slower than initially expected and, so, some of that has been deferred to 2025,” the research firm said.
While spending might appear resilient, American consumers seem prepared to take a pause or pull back.
The Conference Board’s Consumer Confidence Index fell by 7 points in February to 98.3. Both components of the Index declined, with the Presentations Index down 3.4 points to 136.5 and the Expectations Index, a measure of outlook six months out, dropped 9.3 points to 72.9. The Expectations Index was below the threshold of 80 for the first time since June 2024, an indicator that a recession could be looming.
“In February, consumer confidence registered the largest monthly decline since August 2021,” said Stephanie Guichard, The Conference Board’s senior economist, global indicators. “This is the third consecutive month on month decline, bringing the Index to the bottom of the range that has prevailed since 2022.”
Guichard said views of the current labor market conditions weakened in February. “Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high,” she explained.
According to Conference Board data, while the decline was across all age groups, it was deepest for consumers between ages 35 and 55. The senior economist also said that the average 12-month inflation expectations surged to 6 percent from 5.2 percent in February, with the increase reflecting a mix of factors that included the recent jump in key household staples such as eggs and the impact of tariffs.
Participants’ answers to survey questions reflected a “sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019,” according to Guichard, who added that comments on the “current Administration and its policies dominated the responses.”
Consumers in February also were less bullish about the stock market, with only 46.8 percent—down from 54.2 percent—expecting stock price increases over the year ahead, the smallest share since April 2024. In addition, 32.8 percent expected stock prices to decline, up from 24.8 percent in January, and more than half at 51.7 percent now expect higher interest rates over the next 12 months.
And for those who are spending, their mindset has shifted.
A February report by CreditCards.com concluded that consumer spending habits since U.S. President Donald J. Trump took office are more along the lines of “doom spending.”
The CreditCards report found that one in five Americans are buying more than usual, mostly driven by Trump’s tariffs. That has 42 percent starting or will start stockpiling items, such as food, toilet paper, and medical supplies and over-the-counter medications. And three in 10 said they were buying in preparation for another pandemic. And one in four have made large purchases since November in fear of Trump’s tariffs. More than half at 55 percent who made large purchases took advantage of holiday deals, while 45 percent did not. Twenty-two percent said planned tariffs had a big impact on their purchase decisions.
According to CreditCards, one in five admit to “doom spending,” where they are buying items excessively or impulsively, in response to fears or anxiety about future events.
While consumers seem to be upping their purchases on necessities, what appears to be off their list of items to buy is apparel. That could be a problem for retailers are they look ahead to first and second quarter sales.
Some footwear firms, such as Crocs and Steve Madden, have already talked about tariff headwinds. And the footwear sector isn’t the only firm talking about possible price increases that can show up as soon as the back-to-school selling season. Carter’s interim CEO Richard Westenberger said during the firm’s earnings conference call on Wednesday that it will continue to keep an eye on pricing to remain competitive, even though lower prices isn’t its longer-term strategy.
And on Friday, a day-long retail boycott at the behest of The People’s Union is expected to take place to protest retail price hikes. The union is calling for shoppers to take part in an “economic boycott” of the nation’s biggest corporations that include Target, Amazon and Walmart.
