The situation in the consumer environment of the United States currently does not demonstrate a solidity and is a space in which people’s behavior depends on their financial capabilities, which is generally not something special or extremely rarely observed, but now the corresponding difference has become more obvious, noticeable and indicative.
In the US, lower-income earners limit their transactions. The corresponding pattern of consumer behavior is related to their desire to focus on essentials. At the same time, wealthy consumers continue to spend freely on perks, including dining out and luxury travel. The mentioned situation is evidenced by the results for the first quarter of 2025 from United States credit card lenders.
In recent months, there has been a high level of anxiety in the US about the future economic prospects. The corresponding sentiments are associated with the entry into force of the trade policy measures of the President of the United States, Donald Trump, providing for sweeping tariffs against almost all countries of the world. Against this background, concerns have increased not only about the situation in the US but also regarding the economic order of things at the global level. Recently, experts have been warning about the risk of a world recession.
According to the media, currently, the interest of investors and economists is focused on determining the level of realism that the deterioration of consumer sentiment is transformed into specific changes in the space of the real economy. Moreover, there are the first signs of stress among those US consumers who are more economically vulnerable. In this case, stress is meant as a kind of emotional reaction of people to the negative dynamic in the context of changes in their financial capabilities.
At Synchrony, which provides store cards for retail brands including Lowe’s and T.J. Maxx, spending in the first three months of the current year showed a decrease of 4%. The company published the relevant data last week.
At the same time, at the American Express spending showed an increase of 6%. A similar upward dynamic was recorded at JPMorgan Chase. In this case, it is noteworthy that the mentioned financial institution and American Express serve wealthier consumers with higher credit scores than Synchrony customers.
According to data from American Express, clients of this company spent 7% more on dining in the first quarter of 2025 than in the same period last year. Spending on first-class and business-class airfare increased by 11%.
Synchrony chief executive officer Brian Doubles told analysts last week that consumers are still in pretty good shape overall, and they are being selective around how they spend.
Lower-income card users, in particular, started tapping their spending about a year ago. They pulled back on discretionary and big-ticket expenses because inflation ate into their buying power. This was told by Brian Doubles.
In the fourth quarter of 2024, the number of people in the United States who fall into debt when using their credit cards increased. Data released this month from the Federal Reserve Bank of Philadelphia shows that the proportion of credit card users making only minimal monthly payments is 11.1%. The mentioned indicator is the highest in the last 12 years.
At the same time, credit card lenders serving wealthier customers have not experienced the sensitive effects of scaling concerns about the impact on consumer spending of factors such as tariffs, inflation, and a potentially likely recession.
Currently, there is actually a situation in which the degree of intensity of spending is higher, the more financial opportunities the consumer has. There is something in this state of affairs that can be described as a kind of obvious manifestation of elementary logic. However, in the general economic context, from the point of view of future prospects, the observed situation is rather negative. A decrease in consumption may affect the growth of gross domestic product (GDP). Also, this factor can potentially have a negative impact on the companies’ revenue indicators. In this case, the most negative scenarios envisage that firms will be forced to lay off employees and reduce investments amid falling earnings. Layoffs can trigger an increase in the overall unemployment rate in the country if the corresponding process turns out to be widespread. Business problems mean lower tax revenues to the budget. The materialization of this potential probability in the most negative scenario may provoke a reduction in social programs. Another possible unfavorable consequence of the decrease in consumer spending is the pressure on financial markets. A drop in investors’ confidence in the context of the mentioned factor can trigger volatility in stock markets.
Citigroup also fixed the split in spending depending on the consumer category. In the unit of this financial institution, which provides cards for retailers, the corresponding indicator fell by 5% over the quarter. At the same time, plastic that carries the bank’s own brand recorded a 3% increase in spending. In this case, it means a cohort with higher credit scores.
Bread Financial, a provider of store and co-branded cards like Synchrony, and Citigroup said that the shift towards essentials and away from travel and entertainment was recorded in the framework of consumer behavior. It was noted that the corresponding tendency is being observed as part of concerns that tariffs will provoke price increases for some goods. This dynamic contributes to an increase in spending currently but may cause a decrease in demand in the future.
Bread Financial chief financial officer Perry Beberman said last week that consumers are buying more electronics, home furnishing, and auto parts. It was also noted that people are currently trying to figure out whether they still plan to buy a certain item, or whether their choice will change if inflation accelerates. Perry Beberman stated that this is the real wildcard.
Further consumer behavior will depend on the economic situation. It is noteworthy that they also impact this situation. However, their actions are typically a response to changes in the economic environment, rather than an initial factor in implementing processes.
As we have reported earlier, Mastercard CEO Denies Consumer Spending Slowdown.
