• US personal spending rose 0.3% month-over-month in June, slightly below the 0.4% consensus forecast.
  • The modest increase reflects continued softening in consumer expenditure after May’s decline, signaling a broader cooling trend.
  • Analysts attribute the slowdown to tighter household budgets, weaker disposable income growth, and shifting labor market dynamics.

A Gradual Slowdown Takes Hold

US consumer spending grew at a subdued 0.3% pace in June, marking another month of tepid expansion as households navigate tighter financial conditions. The figure, released today, fell just short of economist expectations but still indicates resilience in the face of moderating wage growth and depleted pandemic-era savings buffers.

The latest data follows May’s contraction—a 0.1% drop in nominal spending—and underscores a broader shift from the robust post-pandemic consumption boom. Adjusted for inflation, real spending growth has slowed to an annualized rate of around 1% in early 2025, down sharply from last year’s 3% clip. Goldman Sachs now projects full-year growth of just 0.9%, a stark contrast to 2024’s 3.1% expansion.

Labor Market and Debt Pressures Mount

While the job market remains relatively stable, hiring has cooled, contributing to weaker disposable income gains. Younger consumers, in particular, are pulling back amid rising housing costs and student loan burdens. Card spending data for May showed only a 0.8% year-over-year increase, with seasonal adjustments revealing outright declines in some categories.

“The consumer isn’t tapped out, but the days of stimulus-driven splurging are over,” said one analyst familiar with the trends. “We’re seeing more budget-conscious behavior, especially among millennials and Gen Z.” Buy-now-pay-later usage has surged in recent months, further signaling financial strain.

Fed Policy in Focus

The Federal Reserve’s cautious stance on rate cuts has added another layer of pressure, though inflation continues to ease—the 12-month PCE price index dipped to 2.1% in April. Still, without further monetary easing, households face higher borrowing costs for mortgages and credit cards. Retailers and service providers are already pivoting to value-oriented strategies to attract cautious spenders.

Correction: An earlier version misstated the annualized real spending growth rate for early 2025. It is approximately 1%, not 2%.