US consumer spending slows sharply in H1 2025: Fitch

US consumer spending slowed markedly in the first half of 2025, according to Fitch Ratings’ latest Consumer Health Monitor. Trade policy uncertainty, equity market volatility, and a cooling labour market weighed on household demand.

Spending growth dropped to 0.5 per cent in the first quarter (Q1) of fiscal 2025 (FY25) and 1.4 per cent in Q2, a steep decline from 3.7 per cent in Q3 of FY24 and 4 per cent in Q4 of FY24.

Services spending moderated to 0.6 per cent in Q1 and 1.1 per cent in Q2, while durable goods purchases fell by an annualised 3.7 per cent in Q1 amid tariff shocks. Fitch expects growth to average just 1.8 per cent in FY26, down from 2.8 per cent in 2024.

Consumer net worth fell 0.9 per cent in Q1 as equity markets weakened under tariff concerns, though liquidity held steady, with deposits still at 10 per cent of total assets.

While consumer sentiment rebounded in May after months of decline, Fitch said that labour market cooling will limit any sustained recovery in confidence and spending momentum.

“As tariff-related cost pass-throughs to goods increase inflationary pressure, the economy could take a stagflationary turn later this year. Higher prices are expected to hit goods categories first, likely weakening consumer spending ahead of the holiday season,” Olu Sonola, head of US economic research said in a release.

ALCHEMPro News Desk (HU)