Consumer Demand May be on the Brink of a Slowdown
Key Takeaways
Morning Consult’s Consumer Health Index (CHI), a real-time indicator tracking aggregate consumer spending demand, has declined for a fourth straight week and now sits at its lowest level since early July.
A downturn in the labor component of the index–which is incorporated on a lagged basis–suggests that spending growth will face downward pressure for at least the next month.
Labor market pressures seem to be concentrated among the lower and middle income cohorts suggesting that high earners may be able to keep supporting spending.
Consumer resilience is bending, but hasn’t broken
In September, demand appears to have hit an inflection point. The Consumer Health Index (CHI) for U.S. adults has declined for four consecutive weeks, aligning with a downturn in consumer sentiment amid news of weaker jobs growth, percolating inflationary pressures and a government shutdown. Looking ahead, however, it is the labor component that is positioned to exert downward pressure on demand.
Consumer demand and spending has held up surprisingly well in 2025 despite volatile sentiment throughout periods of policy uncertainty and murmurs of potential stagflation. This resilience among U.S. households has been captured by the relatively healthy CHI levels this year, with the index remaining in positive territory–indicative of expanding demand–since January of this year. The index, which was designed to relate to real annual spending growth, is calculated based on two variables: the current personal financial conditions component of Morning Consult’s daily Index of Consumer Sentiment (ICS) and Morning Consult’s unemployment index.
Weaker labor market spells more trouble ahead
Sentiment has been the primary downward pressure on the topline CHI decline in recent weeks, but the labor component is poised to undercut spending demand over the next month. While the sentiment-related component’s impact on spending is incorporated into CHI on a real-time concurrent basis, the labor component is made up of lagged changes in Morning Consult’s unemployment rate and therefore takes more time to show up in CHI. Changes in employment outcomes do not necessarily result in an immediate change in spending habits; it takes time for consumers to adjust to higher or lower income resulting from job changes.
Consequently, the impact of the labor-related portion of CHI on future spending shifts can be previewed for several weeks into the future. Looking ahead over the next month, further cooling in demand appears imminent as consumers increasingly feel the impacts of the weakening jobs market. Should sentiment continue to trend lower as well, as it recently has been, the downturn in spending demand tracked by CHI will be even more pronounced.
High earners to the rescue (again)?
The future view of the labor part of CHI suggests higher earners may be less at risk of a downturn in demand than their lower earning peers. The recent uptick in the unemployment index, which will show up in CHI over the next few months, was mainly driven by adults earning less than $50,000. Those earning at least $100,000 have had less change in labor outcomes recently, so this predetermined component of future CHI movements does not show the same downward drag in October as the all adults series. The middle income group’s labor component has already been putting downward pressure on CHI, and will continue to do so over the rest of the month.
The differing trajectories across income groups has important implications for overall U.S. spending growth and, by extension, economic growth overall. As Morning Consult has been tracking for the past several years, high-income households have been primarily responsible for driving aggregate purchases. In September, as sentiment declined among this group, concern picked up that they might pull back on purchases, undercutting the most critical pillar currently supporting topline demand. As a result of declining sentiment, high earners’ CHI scores slipped lower over the past month. Going forward, it is a positive sign that on the labor side, at least, there is little sign of an imminent downward pressure on demand. Should sentiment stay stable or improve, this group is likely to continue playing their outsized role in supporting aggregate growth.
Continued resilience among the high-income cohort may be an important helper for the economy overall, but the expected imminent decline in demand among lower earning households is, of course, a negative development for financial equality. The scenario may result in a replay of what we’ve seen several times since the inflation surge of 2022: The high-earning minority are able to float above the fray of financial headwinds while the larger, lower-earning population feels a sharper pinch. That said, a continued decline in high earners’ sentiment could offset the stability in this group’s employment outcomes, undercutting demand. Consequently, with a majority of consumers facing downward demand pressures, most of the risk to the spending outlook is on the downside.
Kayla Bruun is the lead economist at decision intelligence company Morning Consult, where she works on descriptive and predictive analysis that leverages Morning Consult’s proprietary high-frequency economic data. Prior to joining Morning Consult, Kayla was a key member of the corporate strategy team at telecommunications company SES, where she produced market intelligence and industry analysis of mobility markets.
Kayla also served as an economist at IHS Markit, where she covered global services industries, provided price forecasts, produced written analyses and served as a subject-matter expert on client-facing consulting projects. Kayla earned a bachelor’s degree in economics from Emory University and an MBA with a certificate in nonmarket strategy from Georgetown University’s McDonough School of Business. For speaking opportunities and booking requests, please email [email protected]
