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Spending Watch – Where is the Consumer Heading From Here?

The consumption part of the economy is probably THE macro variable to watch in 2025. We provide a detailed overview of the state of the consumer across the US, Eurozone and China here!
2025-01-20

The US economy is firing on all cylinders at the moment, and we are slowly but surely reaching a point where it’s safe to say that the business cycle is expanding rather than normalizing, which has been a key factor for the Fed in determining whether to continue their cutting cycle or not. This begs the question of whether or not consumer spending trends are aligned with the Fed’s assumption of normalization, or whether we are actually seeing a reacceleration in consumption, which would make the job a lot trickier for the Fed.

As we know, such reaccelerations are rarely a local phenomenon, and given the semi-soft stand points from Trump on tariffs these days, odds of US strength spilling over to the Eurozone, UK and China has increased materially, and it seems like the signalling from global central banks of cutting cycles materializing globally has increased credit sentiment ahead of the cuts actually being put into place.

So, let’s have a look at how the current consumption picture is looking across the globe.

US: Resilient spending & income optimism – tiny headwinds to combat a turn in credit

The extremely strong US household consumption is the primary driver of sustained GDP growth, and this is THE reason why consumer trends are interesting to watch closely. It simply makes up a lot of the growth we are seeing in GDP and other US growth metrics.

Chart 1: Private consumption is fueling US growth

The consumption part of the economy is probably THE macro variable to watch in 2025. We provide a detailed overview of the state of the consumer across the US, Eurozone and China here!

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