Consumer Confidence and Spending Behavior: Signals from 2025

Consumer confidence has long served as a leading indicator of economic health. But in 2025, the relationship between sentiment and spending is becoming more complex. While some households remain resilient, others are pulling back — not just because of financial constraints, but because of fear, uncertainty, and shifting cultural dynamics. For business leaders, understanding these behavioral shifts is essential to navigating demand, pricing, and messaging in a volatile landscape.

I. The Confidence Index: A Warning Signal

The Conference Board’s Expectations Index — a key measure of consumer outlook — has remained below the recession threshold of 80 for nine consecutive months. This sustained pessimism reflects concerns about inflation, immigration enforcement, political instability, and global conflict. While the Present Situation Index remains relatively stable, the forward-looking sentiment is deteriorating.

Key indicators:

• Holiday spending is projected to decline by 3.9% year-over-year for gift categories, and by 12% for non-gift discretionary purchases.
• Savings rates are rising among middle-income households, suggesting precautionary behavior.
• Credit card balances are increasing, but delinquencies are also climbing — a sign of financial strain.

II. Sentiment vs. Behavior: A Growing Disconnect

Despite low confidence, some consumers continue to spend — selectively and emotionally. McKinsey’s 2025 consumer pulse reveals that Gen Z and Millennials report low financial optimism, yet still engage in “feel-good” purchases, especially online. This divergence between sentiment and behavior is driven by:

• Emotional coping: Small purchases offer psychological relief in uncertain times.
• Digital convenience: Online platforms reduce friction and amplify impulse buying.
• Social influence: Peer behavior and influencer culture sustain demand in certain categories.
• Implication: Traditional forecasting models that rely solely on macro indicators may miss these micro-behavioral nuances.

III. Cultural and Policy Drivers of Spending Behavior

Immigration Enforcement and Fear-Based Retraction

A national study by ThinkNow found that:

• 45% of Hispanic households have reduced spending due to fear of immigration activity.
• 44% avoid public places like restaurants and stores.
• Pride in being American among Hispanic consumers dropped from 77% to 54%.
• Belief in the American Dream fell from 66% to 44%.

This erosion of trust is not just political — it’s economic. When communities feel targeted or unsafe, they retract from public life and discretionary consumption.

Demand for Brand Leadership

Over half of surveyed Hispanic consumers believe brands should publicly oppose immigration raids. This signals a growing expectation for corporate values to align with community needs — not just product offerings.

Strategic takeaway: Brands that demonstrate inclusivity and social awareness are more likely to retain loyalty during uncertain times.

IV. Income Stratification and Spending Resilience

Affluent Consumers: Spending Steady, but Selective

Higher-income households continue to spend, buoyed by strong balance sheets and stable employment. However, they are:

• Trading down in certain categories (e.g., private label groceries)
• Delaying discretionary purchases like travel and luxury goods
• Seeking value even in premium segments

Middle and Lower-Income Households: Vulnerability Rising

These groups are more exposed to:

• Tariff-induced price increases
• Labor market cooling
• Reductions in public support programs

They are:

• Cutting back on dining, entertainment, and apparel
• Increasing reliance on credit
• Shifting toward discount retailers and bulk buying

Implication: Income stratification is reshaping demand curves. Businesses must segment pricing, messaging, and product formats accordingly.

V. Strategic Implications for Business Leaders

1. Segmented Messaging

Tailor communications to reflect the emotional and economic realities of different consumer groups. Avoid one-size-fits-all campaigns.

2. Trust and Transparency

Consumers are looking for more than value — they want values. Brands that demonstrate empathy, inclusion, and social awareness will outperform.

3. Flexible Pricing and Pack Sizes

Offer smaller formats, tiered pricing, and subscription options to maintain engagement without eroding margins.

4. Scenario Planning

Forecasting must account for sentiment-driven shifts, not just macroeconomic indicators. Build models that incorporate behavioral data, cultural trends, and policy risk.

5. Community Engagement

Partner with local organizations, support inclusive hiring, and amplify community voices. These actions build trust and long-term brand equity.

Conclusion: Reading Between the Metrics

Consumer confidence is no longer a simple predictor of spending. In 2025, it’s a layered signal — shaped by emotion, culture, policy, and trust. Business leaders must go beyond the headline numbers and listen to the underlying sentiment. By doing so, they can build strategies that resonate, adapt, and endure.