Consumer Spending Takes a Hit Amid Economic Uncertainty

As the global economy continues to grapple with trade-war talk and volatile markets, consumers are increasingly feeling anxious about their financial future. This unease is manifesting in various aspects of daily life, including household purchases, as individuals and families attempt to cut back on discretionary spending to save money.

One notable trend emerging from this shift in consumer behavior is a decrease in laundry loads per week, with customers opting for fewer washes to conserve on detergent costs. According to Procter & Gamble (P&G) CEO Jon Moeller, consumers are doing fewer loads of laundry as they seek to reduce expenses amid economic uncertainty.

As the leading manufacturer of Tide, P&G is feeling the pinch of this trend, along with its other household staples like Gillette razors, Pampers diapers, and Dawn dishwashing liquid. In response to the consumer pullback, P&G has reduced its financial outlook for 2023, projecting only 2% growth.

Companies Across Industries Feel the Pinch

P&G's competitors are also reporting a similar trend of decreased sales due to consumer caution. Colgate-Palmolive CEO Noel Wallace noted that while consumers are still engaging in essential activities like brushing their teeth and taking showers, they are becoming more hesitant to stock up on non-essential items.

"You'll see consumers destock their pantries and not necessarily buy that extra tube or that extra body wash as they see a very volatile external environment," Wallace said during the company's earnings call. "Uncertainty creates a pensive and anxious consumer."

Wallace further attributed this trend to the February tariff announcements, which he described as a "shock to the system" that made shoppers increasingly cautious.

Household Staples Take a Hit

Makers of household staples are sounding the alarm about the potential impacts of tariffs on China and dozens of global trading partners. These companies fear that even domestic sourcing won't be enough to mitigate the effects, which could lead to economic stagnation or even recession.

PepsiCo, which manufactures popular snacks like Doritos and Cheetos, has responded to this trend by creating smaller snack packs priced under $2 in an effort to attract customers who are spending less. The company expects flat earnings growth this year due to the decline in consumer confidence.

Burrito chain Chipotle has also reported a decrease in sales, with same-store revenues dropping for the first time since the 2020 lockdowns. CEO Scott Boatwright attributed this decline to "the consumer sitting on the sidelines."

April Spending Data Offers a Mixed Picture

According to Bank of America's spending data, April consumer spending held up after taking a hit in February. However, this positive trend may be short-lived as consumer sentiment continues to fall.

The University of Michigan's flagship survey has reported a four-month decline in consumer mood, the steepest since the 1990 recession. Consumers' views of current conditions are now as bleak as they were at the end of 2022, when the Ukraine war and domestic economic overheating sent home heating prices soaring.

Economists Weigh In on Consumer Spending

Comerica Bank chief economist Bill Adams attributes this decline in consumer confidence to a range of factors, including tariffs, stock market volatility, inflation, and recession fears. "Consumers are freaked out about their financial future," he said.

Adams warns that the U.S. economy is headed in a bad direction, with increasing risks of a recession as uncertainty continues to build.