The State of Consumer Spending in Eight Tables & Charts

Drug spending is booming, but unfortunately CPG companies, non-drug retailers, restaurant chains, hotel chains, airlines, automakers, luxury goods companies and others don't benefit

I wrote last week about the fact that the fastest-growing major U.S. consumer spending categories over the past three years have been mandatory rather than discretionary in nature: health care, housing, and financial services and insurance. This, against the backdrop of stagnant real (inflation-adjusted) incomes: real average weekly earnings are up just ~2% since February 2020, as the consumer price index (CPI) growth rate has exceeded the Fed’s 2% inflation target for 53 straight months. It’s no wonder, then, that discretionary spending on goods and services is under growing pressure, and that sales and earnings estimates for many large consumer companies have been reduced YTD. Below are eight tables/charts that illustrate what’s happening.

(1 & 2) Consumer packaged goods (CPG) companies’ organic sales and volumes have flatlined; the sales trends are worse than pre-pandemic levels. (3) Large retailers’ comparable sales have similarly flatlined, with a few exceptions such as supermarket chains whose sales growth is being driven by pharmacy/drug sales (on the health care spending theme I mentioned above). (4) Restaurant chains’ comparable/same-store sales have flatlined, with the latest example being Cava (whose comparable sales growth went from 21.2% two quarters ago to just 2.1% in 2Q25). (5) The two largest U.S. hotel chains reported their weakest domestic RevPAR (revenue per available room) performance in many years in 2Q (pandemic period aside). (6) The four largest U.S. airlines experienced their weakest domestic passenger revenue trends in many years in 2Q (pandemic period aside). (7) The world’s largest luxury goods company, LVMH, has experienced a notable deterioration in its sales trends both in the U.S. and globally, well worse than pre-pandemic levels. The company’s CFO said earlier this month that spending by American tourists has slowed down “very strongly.” (8) Light vehicle (auto) sales remain below pre-pandemic levels. And not shown is the fact that existing home sales are essentially back to 2008 lows despite significant population growth over the past 15-20 years.

Is the second half of the year likely to be better for many of these companies, bearing in mind that student loan delinquencies have hit a record (link) and that many goods prices are rising following President Trump’s tariffs? And if not, why are all manner of asset prices hitting record levels against this backdrop?

Ongoing enormous government deficit spending helps (injects money into the economy), as does the Federal Reserve’s still-bloated balance sheet. Another major factor, in my view, is the enormous leverage that banks and their affiliated broker-dealers are providing hedge funds, private equity/credit firms and other nondepository financial institutions (NDFIs) with, and on (very) generous terms in many cases. That’ll be the topic of my next post.