For years, American consumers propped up the economy, brushing off inflation and high interest rates.
That resilience is now showing cracks. Retailers, airlines, and household brands are seeing spending pull back as tariffs return, inflation lingers, and economic uncertainty grows.
Business leaders warn that the road ahead looks more turbulent than Wall Street had hoped.
From Walmart to Delta, companies across industries are signaling weaker-than-expected sales in early 2025.
Corporate earnings calls are sounding more cautious, with CEOs bracing for unpredictability as President Donald Trump’s administration reworks trade policies on the fly.
Rising tariffs on imports from China, Canada, and Mexico could push prices higher, squeezing household budgets even further. Consumer confidence took its biggest dive since 2021, a stark warning that people may finally be pulling back.
Luxury Spending Stalls, Air Travel Slows
The post-pandemic travel boom that defied inflation is losing steam. Delta, United, American, and Southwest all slashed forecasts, citing weaker demand.
Delta CEO Ed Bastian noted that both corporate and leisure travel have softened, with customers hesitating in an uncertain economic climate. “Consumers in a discretionary business do not like uncertainty,” he said on CNBC.
“And while we do believe this will be a period of time that we pass through, it is also something that we need to understand and get to calmer waters.”
United Airlines is taking action, retiring 21 aircraft early and considering flight reductions, particularly on routes tied to government spending. CEO Scott Kirby pointed out that federal layoffs have hit business travel hard, with ripple effects bleeding into the leisure sector.
“It started with government. Government is 2% of our business. Government adjacent, all the other consultants and contracts that go along with that are probably another 2% to 3%. That’s running down about 50% right now.
So a pretty material impact in the short term,” Kirby said at a recent industry conference.
American Airlines, meanwhile, blamed weaker bookings on economic pressures and safety concerns following high-profile aviation incidents.
In addition to demand pressures, bookings were hurt after a deadly midair collision involving an Army helicopter and one of its regional jets in Washington, D.C., in January.
Retailers Brace for a Tougher Year
If any company knows how consumers behave in a downturn, it’s Walmart. When the retail giant issued a cautious profit outlook last month, its stock tumbled.
Finance chief John David Rainey told analysts, “It’s prudent to have an outlook that is somewhat measured.” Walmart expects shoppers to shift toward essentials, cutting back on higher-margin discretionary purchases.
Other major retailers are echoing that sentiment. Dick’s Sporting Goods, Abercrombie & Fitch, and e.l.f. Beauty all issued tepid forecasts, even as they remain optimistic about a second-half rebound.
American Eagle, meanwhile, pointed to “less robust demand” and is trimming expenses to prepare for continued softness.
Consumers Are Feeling the Pinch
For budget retailers, the warning signs are even starker. Dollar General CEO Todd Vasos noted that customers are reporting worsening financial situations, with many struggling to afford even basic necessities.
“They expect value and convenience more than ever,” Vasos said, signaling that discretionary spending may not bounce back anytime soon.
American Eagle’s CEO Jay Schottenstein underscored the broader mood of caution. “Consumers have the fear of the unknown. Not just tariffs, not just inflation, we see the government cutting people off. They don’t know how that’s going to affect them. They see programs being cut, they don’t know how that’s going to affect them,” he said.
“And when people don’t know what they don’t know – they get very conservative … it makes everyone a little nervous.”
Wall Street has taken note. The S&P 500 tumbled 10% from its February highs before recovering some ground.
Investors and executives alike are watching closely, waiting to see whether this is just a momentary blip or the beginning of a deeper pullback.
After years of resilience, the American consumer might finally be reaching their limit.
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