America's long consumer boom begins to falter

America's consumer spending, which remained robust since the pandemic, is showing signs of weakening as the country approaches the upcoming election. Major brands, including McDonald's, Hershey, and Starbucks, report declining sales and a shift in consumer behavior, with many shoppers pulling back on discretionary spending. McDonald's has introduced a $5 Meal Deal to attract customers, while Hershey noted a significant drop in organic net sales. Procter & Gamble and Amazon also reported weakening sales growth, indicating a broader trend across various sectors.

The inflationary pressures that have affected consumer goods over the past three years are contributing to this slowdown. Although consumers initially maintained spending due to excess savings and a strong labor market, recent data suggests a shift back to services from goods. Economists believe that while the economy is slowing, it is unlikely to face a severe downturn, as many households still enjoy healthy income growth and wealth levels.

The political implications of this consumer sentiment shift are significant, especially with inflation being a key issue in the presidential campaign. Former President Trump has criticized Vice President Harris for inflation, while the Biden administration has pointed to recent price reductions by retailers. Additionally, rising interest rates and a decrease in personal savings are straining lower-income consumers, who are increasingly opting for smaller, more affordable product sizes. The labor market is also showing signs of cooling, with job openings declining and the unemployment rate rising.