Consumer Says: The U.S. economy weathered H1 2025 with surprising resilience

Today’s GDP release from the Bureau of Economic Analysis showed a strong rebound in Q2, with the annualized top-line growth rate increasing to 3.0% after declining 0.5% in Q1. However, the trend so far this year has been primarily dictated by tariff-related volatility in trade flows: In Q1, net exports dragged down the top-line number as firms front-loaded imports ahead of expected tariff implementations, whereas in Q2, net exports bounced back as imports declined. Consumer spending also contributed to the increase in GDP, but the 1.4% increase constituted a slower pace than was typical in 2024.

Temperature check on the U.S. economy

In each edition of Consumer Says, our economists give an updated rating for current economic conditions using temperature as a metaphorical metric. Our “perfect temperature”--signifying an economy that is strong but not overheating–is 70 degrees. 

🌡️Current temperature: 64 ℉

Earlier this month, we rated the economy at 65 degrees. Most government data releases since then confirmed a relatively resilient, stable economy through June. However, Morning Consult’s daily tracking offers a more up-to-date picture of where consumers stand at the end of July, and these signals point to potentially softer momentum in recent weeks. Specifically, the Consumer Health Index (CHI), which has historically been a leading indicator for spending, plateaued after trending higher for most of 2025, suggesting demand may be losing momentum. For this reason, along with the risk of more tariffs scheduled to take effect on August 1, we are slightly downgrading our economic “temperature”.

Consumer says:

😵‍💫Consumer sentiment is mixed: The Conference Board announced a better-than-expected increase in top-line consumer confidence yesterday, attributable primarily to improving expectations for future conditions. However, concerns about the labor market, as hiring remains slow, along with the threat of potential further price increases from tariffs, are creating a mixed picture. 

• 📣Consumer Says: Morning Consult’s daily Index of Consumer Sentiment is constructed differently from the Conference Board’s index, with less emphasis on the labor market and more emphasis on personal finances and business conditions. The ICS averaged slightly lower in July than in June, with views on business conditions and current buying conditions among the components that drove down the index.

🛒 Consumer spending is growing, but not booming: Today’s GDP report confirmed that consumers expanded purchases in the second quarter with personal consumption expenditures (PCE) rising by a 1.4% annualized rate. Tomorrow, monthly data will be released on June expenditures specifically, with economists expecting a 0.1% increase in monthly outlays according to Bloomberg’s consensus forecast.

• 📣Consumer Says: Morning Consult’s U.S. consumer spending data, which is similar to PCE in that it covers a broader array of goods and services categories than just retail, supports expectations for a modest lift in June, as the measure, which is adjusted for inflation and seasonality, increased 1.5% last month. While the trend over the past few months has been generally positive, the close correlation between Morning Consult’s spending and the daily Consumer Health Index (CHI), which gives us a glimpse of demand through late July, suggests we may see some easing in demand going forward. CHI faltered slightly in recent weeks, and based on historical trends, this stagnation is likely to show up in spending in the coming months.

🏠 Welfare check on housing market: Today brought more negative news for the housing market, with pending home sales declining 0.8% in June and mortgage applications declining 3.8%. Earlier this month, data showed home sales continue to be historically weak. Certain markets with more plentiful supply, particularly in the South and West, now see declining home prices. However, at a national level, home prices remain unaffordably high (especially at current interest rates) for many consumers.

• 📣Consumer Says: Morning Consult’s data on monthly housing spending by region shows that consumers in areas with softer housing costs are reallocating spending to other categories. In the South, where consumers report the largest decline in housing costs, the share of wallet dedicated to other priorities–including discretionary spending–has increased the most over the past year. Other regions like the Northeast continue to have rising home prices, but consumers are expanding spending on other categories at a faster rate.