As of January 2025, U.S. consumer confidence has experienced fluctuations influenced by various economic factors. In January, the University of Michigan's Consumer Sentiment Index declined to 71.1 from December's 74.0, marking the first decrease in six months. This downturn is attributed to concerns over the labor market and potential price increases stemming from proposed import tariffs by President Donald Trump's administration. Notably, 47% of consumers anticipate higher unemployment rates, the highest percentage since the pandemic recession. Additionally, one-year inflation expectations have risen to 3.3% from December's 2.8%, reflecting apprehensions about the impact of anticipated tariff policies.
Despite these concerns, U.S. consumers have demonstrated resilience in the face of sustained inflation and higher borrowing costs. During the 2024 holiday season, retail sales reached $994 billion, a 4% increase from the previous year. Major U.S. banks reported increased earnings for the fourth quarter, driven by significant credit card expenditures, particularly on products from retailers like Target and Costco. Consumers have been cautious and intentional with their spending, focusing on essential purchases, even as credit card delinquency rates and interest rates remain high. Analysts note that robust consumer activity has been crucial in driving economic growth.
However, looking ahead, there is caution among consumers as they enter 2025. Concerns about rising prices and the potential impact of new tariffs from the Trump administration contribute to this wariness. While the holiday shopping season demonstrated consumers' willingness to spend, it was primarily on discounted items, and overall spending intentions remain conservative. The outlook for the retail environment in 2025 is uncertain, with potential challenges posed by new tariffs and ongoing economic uncertainties.
