Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results.
Although policy uncertainty around tariffs has kept investors worried about a potential slowdown, consumer spending, which accounts for 70% of GDP, remained resilient.1
In June, retail sales, a proxy for consumption, grew 3.9% year over year, beating May’s 3.3% and surpassing the 3.2% average established since 2024.2 When we look at the underlying components, we find that consumers are still purchasing big-ticket items such as home appliances and furniture, and they are still dining out. Many investors have speculated that the consumer would crack amid the policy uncertainty and weakened sentiment, but so far spending has held up. We believe a key reason has been the job market.
Though the job market has slowed somewhat, as evidenced by monthly payrolls, jobless claims remain in line with the historical trend.3 In addition, the unemployment rate has held steady. The wealth effect, or consumer confidence driven by perceived rising equity and housing prices, has also supported spending. 4
Faced with a resilient consumer, we expect spending to support economic growth in the vicinity of 1% this year.
1,2,3,4 Bloomberg, July 2025.
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