What: Consumer sentiment erases year-end gains in Q1 2025 amid tariff uncertainty, with Home DIY and Personal Sport & Leisure sectors showing particular weakness and CPG companies facing increased challenges.

Why it is important: The erosion of consumer sentiment combined with sector-specific impacts demonstrates how tariff uncertainty is creating both immediate and long-term challenges for retailers.

The first quarter of 2025 has seen a significant reversal in consumer sentiment, erasing improvements recorded at the end of the previous year. This decline is primarily driven by heightened uncertainty surrounding tariffs, which has manifested in subdued retail and e-commerce sales growth across the quarter. The impact has been particularly pronounced in specific sectors, with Home DIY and Personal Sport & Leisure experiencing reduced sales compared to the previous quarter. Consumer Packaged Goods (CPG) companies face substantial challenges in achieving their goals for the remainder of the year, as indicated by market conditions and consumer behavior. The situation appears to be worsening, with April recording a further 24% decline in consumer sentiment. This deterioration in confidence and sector-specific performance suggests broader implications for retail strategy and market dynamics throughout 2025.

IADS Notes: Recent consumer sentiment data reveals deepening concerns about economic headwinds and tariff impacts. According to Visa in March 2025 , consumer confidence hit a three-year low, with inflation expectations surging to 6.0% and significant anxiety about economic conditions. BCG's April 2025 analysis  showed this decline was already underway before tariff announcements, with particular weakness in lower-income household spending intentions. Inside Retail's April 2025 coverage  projected price increases of 1 to 1.5% this year, with disproportionate impact on lower-income households facing a potential 2.3% drop in disposable income. Vogue Business's March 2025 report  highlighted how these pressures are reshaping consumer behavior, with 62% expressing concern about rising costs and retailers adapting through enhanced value propositions and private label offerings. The pronounced weakness in Home DIY and Personal Sport & Leisure sectors, combined with the sharp 24% fall in consumer sentiment in April, suggests a fundamental shift in spending patterns that could reshape retail sector performance throughout 2025.

US customer sentiment nosedives as tariffs impacts begin to take shape