Economists Warn: Rising Inflation Impacting Consumer Shopping Habits
In July 2025, US consumer sentiment notably improved, reaching its highest level in five months with a University of Michigan preliminary sentiment index score of 61.8, up from 60.7 in June. This rise was driven mainly by easing inflation fears, as short-term inflation expectations fell to 4.4% from 5.0%, the lowest since February 2025.
Regarding spending trends, data from BofA Institute indicated a modest rise in seasonally adjusted spending per household by 0.3% month-over-month in early July. However, this increase was insufficient to recover from prior declines. The broader economic activity as measured by the S&P Global US PMI showed acceleration driven by a strong services sector offsetting manufacturing weakness.
Despite the improvements, consumers still expressed weaker expectations for business conditions, labor markets, and personal incomes compared to the previous year. The sentiment gains suggest diminishing fears of worst-case economic scenarios seen earlier in the year.
Inflation pressures intensified with rising costs attributed largely to tariffs and labor shortages, leading to higher selling prices for goods and services in July. This upward price pressure was particularly evident in sectors such as housing, gasoline, and healthcare.
Jefferies Equity Research analysts have reported that inflation is becoming a more significant factor for consumers. They have changed their stance, suggesting that they might be seeing the initial signs of spending exhaustion. The report covers a variety of spending sectors, including gambling.
The report suggests that the last few months of stagnation in consumer sentiment may be beginning to impact consumer behavior. Consumer sentiment may have peaked in the first quarter of 2025, and spending growth is worse than staples growth, with the lower-income cohort posting decelerating growth. Crucial high-end spending seems to be manifesting a continued slowdown.
In summary, a Jefferies Equity Research report would likely highlight:
- Improved consumer sentiment in July 2025 due to easing inflation concerns.
- Moderate growth in household spending, with stronger demand in services offset by manufacturing softness.
- Rising inflation pressures stemming from tariffs and labor costs, possibly pressuring consumer prices upward.
- Persistent caution among consumers about business and labor market conditions despite sentiment improvements.
If you need specific Jefferies analysis, I recommend checking Jefferies’ direct publications or subscription-based equity research platforms, as the publicly available sources summarize underlying data but do not contain the exact Jefferies report text.
- The Jefferies Equity Research report indicates that the improved consumer sentiment in July 2025, which resulted from easing inflation concerns, might have a significant impact on the business sector, as moderate growth in household spending was observed.
- In their report, Jefferies Equity Research analysts have pointed out that the persistently cautious approach of consumers towards business and labor market conditions, despite the July 2025 sentiment improvements, could be a result of rising inflation pressures stemming from tariffs and labor costs, potentially leading to increased consumer prices in various sectors, including housing, gasoline, and healthcare.
