Rising debt, stubborn inflation, immigration concerns, and extreme weather are already reshaping consumer spending behavior in the U.S., according to a new report from Circana, LLC. Even before potential new tariffs come into play, many Americans have begun adjusting how they shop, prioritizing value and essentials over discretionary spending.
Marshal Cohen, chief retail industry advisor for Circana, said consumers are under mounting pressure. “The consumer is in a state of confusion and trying to decipher how to prioritize their purchases in an environment of significant change,” he said.
Wages Lag Behind Inflation
Since 2020, prices have surged across most consumer goods, outpacing wage growth. That imbalance has weakened demand, especially in non-essential categories.
General merchandise prices peaked in 2023 at 25% above pre-pandemic 2019 levels. At the same time, demand for those items dropped by as much as 9%. In late 2024, average prices were still up 17%, while unit demand declined by 7%.
As a result, shoppers are opting for mainstream and private-label products rather than premium brands. This shift underscores a key trend in evolving consumer spending behavior: price sensitivity drives decisions across nearly every category.
Hispanic Consumers Cut Back Faster
Spending behavior among Hispanic consumers is shifting more dramatically than among non-Hispanic groups. Circana reports that Hispanics’ discretionary spending declined faster throughout late 2024 and into early 2025.
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For the first time in two years, Hispanic consumer demand trails that of non-Hispanic shoppers. This downturn suggests a broader economic strain affecting a key demographic that typically plays a significant role in U.S. retail.
Weather-Driven Disruptions Intensify Retail Impact
Regional weather disasters have added further pressure on consumer spending behavior. In January 2025, wildfires in Southern California and Winter Storm Blair led to a steeper drop in discretionary spending, pushing the weekly decline from 1% to 4%.
Later that month, Winter Storm Enzo blanketed the Gulf Coast with record snowfall. The result was double-digit dollar sales declines in affected areas. However, the storm also lifted sales in cold-weather essentials as consumers scrambled to meet immediate needs.
Cohen emphasized that such surprises highlight how quickly consumer priorities can change. “Unexpected events create unexpected needs and put added pressure on consumers,” he said.
Retailers Must Prepare for Long-Term Changes
While much attention has focused on potential tariffs, Circana’s findings suggest the U.S. retail sector is already grappling with structural changes in consumer spending behavior. These shifts stem from current realities—not future policy.
Retailers must adapt quickly. The trend toward value shopping and regional unpredictability point to a more cautious, selective consumer. With economic, environmental, and social pressures combining, traditional shopping patterns are unlikely to return soon.
As Americans navigate uncertainty and rising living costs, their spending decisions reflect immediate needs and tighter budgets. Retailers hoping to stay competitive must recognize these evolving behaviors and respond with agility.
Consumer spending behavior, once predictable, now reflects a marketplace defined by rapid change.