Swipe, Save, or Splurge: The Behavioral Shift in consumer Spending in US
Jul 24, 2025
Despite rising fears of a recession and consumer sentiment trending downward, US consumer spending is not only holding steady — it’s surging. Underlying this paradox is a complex web of behavioral shifts, policy reactions, income disparities, and forward-looking consumer psychology. From strategic stockpiling in anticipation of tariffs to generational trade-downs and income-based divergence, there is a shift in consumer spending changes post inflation, and American households are responding dynamically to economic pressure. spending trends by income level.
In this analysis, we examine current US consumer behavior, explore the drivers behind these shifts, and forecast how behavioral traits may evolve as trade and fiscal policy continue to reshape the economic landscape.
The Spending Paradox: Higher Caution, Yet Higher Consumption
Consumer sentiment, as tracked by the University of Michigan, has dropped 16% since December 2024, reflecting deepening concern retail adaptation to inflation, tariffs, and global uncertainty. Yet data from the US Bureau of Economic Analysis (BEA) shows real personal consumption expenditures (PCE) rose 3.3% year over year as of March 2025 — the strongest annual increase since December 2023.
Key March 2025 Highlights:
Overall consumer spending rose by $134.5 billion from February — a 0.7% jump.
Durable goods saw a $56.6 billion increase, especially in motor vehicles and parts.
Spending on services climbed by $79.9 billion.
Real GDP, paradoxically, contracted 0.3% in Q1 2025, largely due to surging imports.
So what’s driving this contradiction? Much of the activity points to front-loading — consumers and businesses accelerating purchases to avoid impending cost hikes triggered by President Donald Trump’s proposed tariffs. High-ticket items, such as cars and major appliances, are particularly susceptible to price sensitivity, creating a race to buy before tariffs are enforced.
Tariffs: The New Inflationary Trigger
According to the Yale Budget Lab, effective US tariff rates have now climbed to 20.6% — the highest since 1910. Even after adjusting for consumption patterns, the rising cost impact on spending remains historically severe. This has driven broad concern across households, with 86% of consumers expressing anxiety about how tariffs will affect their personal finances.
Below mentioned are details of the shifting consumer purchase behavior :
45% of consumers say they are cutting back on non-essentials.
30% are delaying big-ticket purchases.
50% plan to postpone discretionary spending in categories such as electronics, apparel, and dining out.
Sectors already showing tariff-induced price hikes:
Major appliances: +1.9% in June (after a 4.3% increase in May).
Toys: +1.8%
Home furnishings: +1.0%
Everyday goods like baby gear and housewares are also seeing markups at major retailers like Walmart.
The Great Divide: Affluent spending vs middle class
As the US economy faces increasing uncertainty due to tariffs, inflation, and trade disruptions, there is a widening gap between households with high-income spending patterns and the rest of the population. This divergence is particularly visible in the resilience and composition of spending across income brackets.
According to Moody’s Analytics, the top 10% of US households — those earning $250,000 or more annually — now account for approximately 50% of all consumer spending. That’s a significant concentration of purchasing power, especially when compared to the early 1990s, when this group was responsible for just one-third of total consumption.
This shift has material implications for how brands position themselves and whom they target with focus on spending trends by income level. High-income households continue to exhibit strong spending behavior, largely insulated from the pinch of rising prices and tariff-induced inflation. Their consumption habits remain aspirational and experience-oriented:
Airlines such as United and Delta are reporting robust growth in premium cabin bookings, indicating that affluent consumers are still prioritizing comfort and exclusivity in their travel choices.
American Express, which caters disproportionately to higher-spending clients, highlighted “remarkable resilience” in its customer base, particularly in categories like fine dining and experiential purchases.
In stark contrast, lower- and middle-income households — many of whom are more vulnerable to price volatility — are demonstrating defensive consumer behavior:
These consumers are increasingly trading down and altering product choice in economic stress like opting for lower-priced alternatives or private-label products to manage household budgets.
Numerator’s Tariff Sentiment Tracker reports that 13% more low-income consumers are switching brands compared to those making over $100,000 annually.
Categories once considered discretionary — like restaurant dining, new apparel, and home décor — are seeing significant cutbacks among these segments.
This divide underscores the risk of relying on top-line consumer spending figures without understanding where that spending is concentrated. The durability of luxury and premium segments may continue even in economic downturns, while value and discount brands must adapt to meet the heightened price sensitivity of the average consumer.
Generational Divide: How Boomers, Millennials, and Gen Z Respond Differently
In addition to the income-based divide, a generational split is emerging in how consumers purchase behaviour pressure evolve. The latest Consumer Wise survey reveals distinctive patterns in spending intent, coping strategies, and lifestyle priorities across Baby Boomers, Millennials, and Gen Z.
Baby Boomers (ages ~60+):
Boomers are the most conservative when it comes to discretionary spending. Only 20% intended to splurge in Q1 2025, making them the least indulgent generation.
They are also the most likely to reduce non-essential expenditures, with 12 percentage points higher inclination than the average across all age groups.
Loyalty to known brands remains strong among Boomers. They are less likely to explore secondhand or alternative markets, possibly due to a combination of purchasing habit, perceived reliability, and aversion to experimentation.
Millennials (ages ~27–42):
Millennials are more balanced in their financial responses. Over half report an intent to splurge — particularly on meaningful experiences like travel or personal milestones like engagements or anniversaries.
However, many are employing nuanced trade-down strategies: instead of switching brands, they buy smaller pack sizes or reduce quantities to preserve brand preference.
Millennials are also increasingly redirecting discretionary funds toward essentials such as groceries and utilities, showing an evolving mindset where food and wellness are viewed as necessities, not luxuries.
Gen Z (ages ~18–26):
Gen Z is the most economically reactive cohort, with responses driven by budget constraints, employment precarity, and recent market entry.
They are also the most open to secondhand purchases, outpacing other generations by 7 percentage points. This is likely influenced by both necessity and cultural shifts toward sustainability and “thrift culture.”
Interestingly, despite their cautious financial habits by age group, Gen Zers still express strong intent to spend on seasonal or emotional occasions — especially on home improvement projects and travel experiences. This suggests a deep value placed on quality of life and shared moments, even in times of uncertainty.
These generational trends indicate that a one-size-fits-all approach no longer works. Baby Boomers seek familiarity and stability. Millennials value balance and quality. Gen Z is adaptive, digitally influenced, and experience-driven — even when economically constrained.
For businesses and marketers, the path forward is clear: understand your audience not just by demographics, but consumer mindset during downturn, economic exposure, and behavioral motivations. As consumers navigate volatile economic terrain, brands must align offerings with these evolving traits to remain relevant and resilient.
What’s Next? Behavioral Traits to Watch
As tariffs fully take effect and the inflation narrative evolves, consumer behavior is expected to pivot further. Key behavioral trends to monitor:
Defensive Purchasing: Expect further “pull-forward” of purchases (especially durable goods) before price hikes.- As anticipation of price hikes grows — particularly on imported or tariff-sensitive goods — consumers are accelerating their purchasing timelines. This behavior, known as “pull-forward purchasing,” is especially pronounced specially for inflation effects on consumer goods, including home appliances, electronics, automobiles, and furniture.
Brand Downgrading: Growth of private labels and lower-cost alternatives in both food and non-food categories - As cost-of-living concerns deepen, consumers are increasingly trading down to more budget-friendly options — not just in food, but across categories such as household items, personal care, and even over-the-counter healthcare products. Supermarkets and mass retailers will continue to see growth in private-label brand sales, especially for staples like snacks, cleaning supplies, and baby products. Brands that previously enjoyed mid-market dominance may lose share to both ends of the spectrum — discount and luxury — as polarization increases. Marketing strategies will need to pivot: consumers now expect affordability without compromising on perceived value or aesthetics
Shift to Second hand: Especially among younger consumers, where sustainability and cost-effectiveness converge - Particularly among Gen Z and younger Millennials, secondhand and strategic shopping behaviour is gaining momentum — not just out of economic necessity, but also due to increased eco-consciousness. Platforms like Facebook Marketplace, Poshmark, and thredUP are seeing rising user engagement, and even mainstream retailers are exploring resale and trade-in programs. Categories such as fashion, electronics, home décor, and even furniture are becoming increasingly circular. Brands should explore rental, resale, or trade-in offerings to stay relevant to budget-sensitive and climate-aware audiences. Secondhand is no longer just about affordability; it’s now tied to social capital (e.g., “thrift hauls” on TikTok) and ethical consumption.
Restraint in Discretionary Categories: As essentials like food, utilities, and transportation consume a larger share of the average household spending strategy 2025, consumers are trimming the fat in areas traditionally associated with lifestyle and luxury. This softening is likely to persist until inflation stabilizes and consumer confidence rebounds. Expect “fewer but better” purchases to dominate, with consumers scrutinizing perceived value before parting with discretionary income.
Continued Splurge Polarization: High-income consumers will likely maintain or expand splurging patterns, while low- and middle-income groups will contract theirs. The most telling behavior emerging in the post-COVID, high-inflation, tariff-sensitive economy is the growing polarization in discretionary spending. While low- and middle-income consumers are opting for cost-cutting consumer strategies and reprioritizing, the affluent segment — which now accounts for 50% of total US consumer spending — continues to splurge. High-income households are increasing spending on luxury travel, premium experiences, and branded goods. Luxury market resilience trends and brands like Louis Vuitton, Apple, and Peloton continue to grow numbers even in turbulent quarters. Meanwhile, mass-market and mid-tier brands may face stagnation or contraction if they fail to offer clear value differentiation.
Conclusion
Tariffs have injected a new layer of complexity into American shopper psychology trends, spending trends by income level, and accelerating behavioral divergence across generations and income groups. While aggregate spending remains strong — buoyed by affluent consumers and tariff-driven urgency — underlying sentiment is fragile and signals growing caution.
Brands and policymakers alike must recognize this evolving consumer landscape: one where macroeconomic policy, generational values, and personal financial realities intersect to shape the new rules of spending. For businesses, understanding and responding to these behavior shifts will be key to staying resilient in a landscape defined by uncertainty.
Inflation, tariffs, and shifting spending habits are reshaping markets — not just in the U.S., but worldwide. With Market Xcel’s global fieldwork expertise, you can decode how consumers across regions are adapting, comparing patterns, and making purchase decisions.
Explore how global shoppers are responding — with insights that start where the data lives.