Consumers adjusting purchasing decisions amid tariffs, elevated prices
Rising prices and debt, immigration concerns and severe weather are producing material changes to typical retail activity ahead of unknown tariff impacts.
While the impact of tariffs remains unknown, consumers are already adjusting purchase decisions as a result of broader circumstances that are impacting them now, according to a new report from Circana. The continued pressure of elevated prices, rising debt, concern among the Hispanic population, extreme weather and natural disasters are disrupting normal spending patterns.
“Dynamic shifts in consumption are already occurring across consumer groups and retail segments,” said Marshal Cohen, chief retail industry advisor for Circana. “The consumer is in a state of confusion and trying to decipher how to prioritize their purchases in an environment of significant change.”
Since 2020, prices have risen across most consumer goods, and wages have lagged, resulting in weakened consumer demand. While there is less of a gap in retail food and beverage and at foodservice, the impact on discretionary general merchandise and non-edible consumer packaged goods is noticeable.
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In 2023, general merchandise reached a peak average price increase of 25% over pre-pandemic 2019 levels, and demand had fallen as low as a 9% decline. In the fourth quarter of 2024, the average price increase of goods sold was up 17%, and unit demand slowed to a 7% decline.
Part of the recent shifts is the result of consumers choosing more mainstream or value product options, including private label, moving their spending away from the more premium offerings, noted Circana.
Some spending shifts are specific to consumer groups. Discretionary purchasing among Hispanic consumers continues to fall at a faster pace than non-Hispanic purchasing. The declines that accelerated in the second half of 2024, and continue through early 2025, have resulted in the first time in two years that Hispanic consumer demand under-performed that of non-Hispanic consumers.
Other changes in consumption are more regional, like those related to major weather events or natural disasters. In the first week of 2025, Southern California wildfires and a major winter storm (“Blair") initiated spending disruptions that deepened discretionary spending declines from a 1% 2024 average to 4% for that week.
Another major winter storm ("Enzo") then dropped record-breaking snow on parts of the Gulf Coast, resulting in double-digit discretionary dollar sales declines in that region. Those unexpected storms, and generally colder temperatures in the U.S. this January provided a boost for many cold-weather categories that consumers needed in the moment.
“Unexpected events create unexpected needs, and put added pressure on consumers,” said Cohen. “As more uncertainty and new dynamics enter the picture, the consumer has made it clear that they will not continue to spend in their usual way.”
This story originally appeared on sister publication Chain Store Age.
