Monthly Economic Insights
Resiliency, caution and shifting consumer choices
Though the clouds of tariffs, inflation and slower growth remain, consumer behavior continues to show remarkable resilience. Can it continue?
Consider the “McDonald’s Effect” playing out across the country. Drive-thru lines for $9 value meals are swelling, while sales at higher-priced fast casual restaurants have softened.
This is more than a restaurant industry trend, it’s a macro signal. Consumers are still spending, but they’re trading down. The $9 “value” meal wins, while the $15–$20 rice or salad bowl struggles.
For business leaders, the lesson is clear: value matters. Brands and businesses that meet consumers where they are on price and convenience are gaining share, while others face headwinds. It will be interesting to see how this develops in the coming months.
The broader economy continues to remain steady. Consumer prices rose 2.8% year-over-year in July, slightly higher than June’s 2.7%. Core inflation is also stubbornly stuck at an elevated level, coming in at 3.1% in July, higher than the 2.8% June core inflation rate.
The Federal Reserve held rates steady at 4.25–4.50% at its July meeting, signaling a wait-and-see approach. However, Fed Chairman Jerome Powell has clearly opened the door to a rate cut at the next meeting in September.
The labor market is stable but slowing. In July, the U.S. economy added 73,000 jobs, while unemployment rose to 4.2%, compared to 4.1% the month before. Gains came from healthcare, education and government, while manufacturing and retail softened.
Average GDP forecasts for 2025 are muted at 1.3%–1.5%, down from earlier estimates near 1.7%. Tariffs with sweeping duties on autos, steel and aluminum, and a broad 10% baseline import tariff are pushing costs higher. For businesses, that means ongoing pressure to manage margins and re-evaluate supply chains.
Bottom Line: The economic environment reflects both resilience and restraint. Consumers are signaling they will keep spending, but only when value is clear. For business leaders, the implications are twofold: manage costs and pricing strategies carefully, and pay attention to how consumer priorities shift in real time. Positive performance will require a focus on the fundamentals of cost control, access to capital and offerings that align with what customers value most.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
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