:max_bytes(150000):strip_icc()/GettyImages-1863298823-2e16cb8956e6463e9ad7f24218829650.jpg "Consumers Are Spending More Carefully As They Worry About High Prices")
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Key Takeaways
- Consumers kept spending in July, but the declines in some categories show that buyers are being more careful as pricing fears grow.
- The consumer sentiment survey showed that consumers planned to cut back on spending on durable goods as inflation worries persisted.
- A different consumer survey showed plans to reduce spending on restaurants and vacations, making room for more essential spending on car and home repairs and financial services.
Consumers are being more selective about how they spend their money and their plans for future purchases, according to several recent reports. These shifts are all tied to concerns about inflation, tariffs and the job market.
For instance, real consumer spending was up by 0.3% in July, according to the most recent Personal Consumption Expenditures report available, led by automobile sales. However, that came at the expense of other purchases, especially discretionary spending at places like restaurants and hotels.
“The composition of spending still carries some mild signs of tough choices for households,” Wells Fargo economists Tim Quinlan and Shannon Grein said in a report. Specifically, they noted that one “early manifestation of tariff impact on consumer spending is the trend decline in discretionary services categories.”
A closely-followed consumer sentiment survey for August also shifted lower on fears about inflation following the implementation of a slate of new tariffs in early August.
“Perceptions of many aspects of the economy slipped,” said Michigan Consumer Surveys Director Joanne Hsu. “Buying conditions for durable goods subsided to their lowest reading in a year, and current personal finances declined 7%, both due to heightened concerns about high prices.”
A separate August survey from The Conference Board also showed that consumer confidence slipped due to fears about inflation and a weakening job market.
“Consumers’ plans to buy big-ticket items were slightly down overall, but with a lot of variation from one item to the next: the strongest increases in buying intentions were for washers and dryers, with the largest declines in TVs and tablets,” The Conference Board report said. “Discretionary spending plans—including on dining out and outdoor and indoor entertainment—were down.”
The board’s Consumer Confidence Index showed that consumers planned to spend on mostly non-discretionary categories like financial services as well as car and home maintenance. Meanwhile, vacation spending plans fell for a second straight month, with intentions to travel abroad and within the U.S. both declining, the report said.
