Consumer Sentiment Analysis in Q1 2025
By Becca Coggins, Christina Adams, and
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In the first quarter of 2025, US consumers reported feeling nearly as optimistic as they did
at the end of the previous year. This optimism was buoyed by a robust economy with low unemployment, steady
job growth, and stable inflation. However, for US consumers across income groups and generations, spending
intentions were down across several discretionary categories. Unlike in early 2024 (when consumers carried
their approach to holiday spending into the new year), consumers this year reverted to their typical approach
to new-year spending.
The following five charts showcase findings from our latest ConsumerWise survey.
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Overall, I’m planning to spend less simply because prices of basic needs like utilities, eggs, food in
general, and fresh items have increased. So I’ll probably spend a little less on apparel and other
things like shoes, and maybe less on vacations, than I have in the past.
Female, baby boomer
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We spent a lot last year . . . so now we’re buying actual necessities and looking for good deals. We
want to be intentional with our money and ensure that our money goes as far as it can possibly go. We
need to be able to afford to live in the current economy, which doesn’t seem to be changing. So we need
to do our best to tighten our belts.
Female, millennial
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We don’t spend a lot of money on other types of entertainment at home, but we enjoy luxury travel at
high-end resorts. We use airline and credit card points, so we try to get the most out of our travel.
I’m worried about inflation and everyday things costing more, but right now, I don’t think it’s going
to affect how we travel.
Male, Gen X
Optimism might have been the prevailing feeling among US consumers in the first quarter of the year, but
spending intentions across demographic groups nevertheless remained mixed. These shifts underscored different
priorities across age groups and income levels. As economic data continues to fluctuate—for instance,
inflation rose above economists’ expectations in January—consumer players should keep a close eye on whether
consumer sentiment and behavior align once again. To contact us for more information or to read additional
insights, check out our ConsumerWise page.
To see previous ConsumerWise insights, visit our page of 2024 research.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams
is a partner in the Dallas office, and Kari Alldredge is a partner in the Minneapolis
office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Braj Bhadauria, Christina Anderson, Christina Sexauer,
Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
Analysis and Recommendations
As we delve deeper into the consumer sentiment analysis for the first quarter of 2025, it becomes evident that
while optimism remains high, there are underlying shifts in spending behaviors and intentions. The impact of
rising inflation on households, particularly in essential spending categories, is a key driver of these changes.
In light of these findings, we present the following analysis and strategic recommendations:
Market Trends
Consumer sentiment is a crucial indicator of economic health, reflecting the confidence and willingness of
individuals to spend. In Q1 2025, while overall optimism prevailed, there was a notable decrease in spending
intentions across various discretionary categories. This trend highlights a cautious approach among consumers,
driven by concerns about rising prices of basic necessities and the need to prioritize essential purchases.
Impact on Industries
The shift in consumer spending patterns has significant implications for industries reliant on discretionary
purchases. Sectors such as retail, hospitality, and travel may experience a slowdown as consumers prioritize
essential spending and seek ways to maximize the value of their purchases. Companies in these industries need to
adapt their strategies to cater to changing consumer preferences and provide value-driven offerings.
Strategic Recommendations
Based on the analysis of consumer sentiment and spending intentions, the following recommendations are proposed
to help organizations navigate the evolving market landscape:
- Focus on Value: Emphasize value-driven propositions to appeal to cost-conscious consumers and provide
offerings that align with their prioritized spending categories.
- Enhance Digital Presence: Invest in digital channels and e-commerce capabilities to reach consumers who
prefer online shopping and seek convenience in their purchasing decisions.
- Offer Personalized Solutions: Tailor products and services to meet the specific needs and preferences of
different consumer segments, enhancing customer satisfaction and loyalty.
FAQ
Q: How can companies mitigate the impact of changing consumer spending patterns?
A: Companies can adapt their strategies by focusing on value, enhancing their digital presence, and offering
personalized solutions to meet the evolving needs of consumers.
Q: What are the key factors driving the cautious approach among consumers in Q1 2025?
A: Rising inflation, particularly in essential spending categories, is a significant factor influencing consumer
behavior and prompting a shift towards prioritizing essential purchases.
Conclusion
In conclusion, the consumer sentiment analysis for the first quarter of 2025 reveals a nuanced landscape shaped by
optimism tempered by cautious spending intentions. As consumers navigate the evolving economic environment,
companies must be attuned to shifting preferences and priorities to effectively engage with their target
audience. By leveraging insights from consumer behavior and market trends, organizations can tailor their
strategies to meet the evolving needs of consumers and drive sustainable growth.
