Consumer spending is wobbling. Inflation, once a background buzz, is now ringing in the ears of everyday buyers—and analysts are beginning to say it out loud. A recent report from Jefferies Equity Research points to a sharp change in behaviour that could spell trouble ahead for retailers.
The data, published on July 17, suggests sentiment may have peaked in Q1. Since then, spending patterns have dropped beneath seasonal norms, with inflation cited more frequently across key categories. The biggest red flag? People aren’t just noticing prices—they’re acting on them.
Cracks Form in the Consumer Confidence Wall
For months, it looked like shoppers were brushing off rising prices. But now, something’s shifting.
Analysts at Jefferies noted that inflation is “starting to feature as a bigger proportion” of consumer perceptions. In plain English? People are feeling the pinch. And they’re beginning to cut back.
Retail sales data for June came in soft—worse than expected, and worse than seasonal factors could explain.
One analyst put it bluntly: “We might be seeing the initial signs of spending exhaustion.”
Even though sentiment bounced in June following geopolitical lulls, it’s been broadly flat since October last year. It’s not falling off a cliff, but it’s also not going anywhere. And that’s starting to matter.
Which Spending Categories Are Getting Hit?
Not every category is suffering equally, but few are coming out unscathed.
Jefferies tracks nine retail categories. Six are currently experiencing clear price pressure. The other three? They’ve been inflation-heavy for ages, according to the report.
Here’s how it breaks down:
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Auto payments
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Food at home
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Food away from home
These three areas have consistently topped the “inflation radar” for consumers. Jefferies has tracked this long enough to call it a trend, not a blip.
In areas like gasoline, health care and housing, sentiment is more mixed—but not by much. Housing was the standout, with more consumers reporting higher costs than in any other category.
One paragraph, one sentence: Even stable categories are starting to feel shaky.
Sentiment Still High… But Starting to Feel Hollow
Consumer sentiment hit a high in June. But it’s been hovering in a tight band since October 2024.
That range-bound sentiment sounds fine—until you factor in inflation. If people feel the same way they did last autumn but their money stretches less far, that’s not really neutral. It’s a slow decline in disguise.
And this is where Jefferies’ concern kicks in. Despite the lack of any major sentiment collapse, the spending data is slumping.
The gap between how people say they feel and how they actually behave is widening. That’s rarely a good sign.
Table: Price Pressure Across Retail Categories
Below is a simplified overview based on Jefferies’ findings. It summarises the sectors most cited for inflation pressure and the corresponding consumer behaviour signals:
| Retail Category | Inflation Pressure Cited | Spending Trend (June) |
|---|---|---|
| Food at home | High | Down |
| Food away from home | High | Flat/down |
| Auto payments | High | Mixed |
| Gasoline | Moderate | Holding |
| Health care | Moderate | Unchanged |
| Housing | Very High | Down |
A simple look, but it says a lot.
What’s Behind the Shift?
Earlier in the year, people seemed surprisingly upbeat. There was talk of resilience, even optimism. But that was before a steady drumbeat of price rises began to sink in.
Since Q1, the cost of living has crept up enough to change the maths for ordinary households. It’s not just about luxuries anymore—essentials are being squeezed.
And it’s not happening in a vacuum. Global tensions have eased, but they left behind a trail of higher costs and shakier nerves. That matters. People might not be scared, but they’re definitely cautious.
Two sentences, short and sharp: Things haven’t broken, but they’re bending.
The Bottom Line: Spending Is Slowing, Quietly
There’s no single big event spooking shoppers. No crash, no crisis. Just a slow, creeping fatigue.
Jefferies analysts were clear—they’d been hesitant to call a slowdown. But now? They’re reconsidering.
It’s a subtle shift, but one with potentially big implications for retail and beyond. If this early exhaustion deepens, Q3 could bring even leaner numbers.
And that’s why everyone’s watching the July data a little more closely than usual.
