Consumer spending

Consumer spending in the United States is expected to reach $16,459.3 billion in 2025, marking a 2.5% growth over the previous year. This expansion is supported by recent interest rate cuts that have bolstered consumer confidence and stimulated spending. However, as inflation remains a concern, the pace of rate cuts has moderated. Trade policy decisions, particularly tariffs, are increasing prices for certain goods, moderating spending growth, especially for consumers facing higher prices for essentials.

From 2020 to 2025, consumer spending experienced fluctuations driven by macroeconomic developments. A sharp 2.5% decline in 2020 was followed by a rebound in 2021, with spending rising 8.8% due to vaccines and fiscal stimulus. This expansion was fueled by pent-up demand and increased disposable incomes. However, the surge in demand during 2022 led to supply chain disruptions and elevated inflation, intensified by global events like the war in Ukraine. The Federal Reserve raised interest rates six times in 2022, constraining purchasing power as energy and commodity prices rose. Spending growth slowed to 3.0% in 2022 and 2.5% in 2023 due to additional rate hikes. Despite challenges, robust employment levels supported continued growth in consumer expenditure. Falling interest rates in 2024 facilitated growth, but tariffs continued to pressure consumer prices, redirecting expenditures toward essentials.

Macroeconomic factors such as monetary policy shifts, global supply chain volatility, and fiscal stimulus have shaped consumer behavior during this period. Higher energy prices, global uncertainty, and interest rate adjustments constrained discretionary spending, though the resilient labor market supported consumption.

Between 2020 and 2025, consumer spending grew at an average annual rate of 3.9%. This period was marked by strong recovery in 2021, followed by moderation due to inflation and policy tightening. Consumer spending patterns shifted in response to price pressures and changing economic conditions, with essential goods seeing stronger demand. Policymaker strategies and geopolitical factors defined the trajectory of US consumption, highlighting the sector's sensitivity to external shocks and macroeconomic policy changes.