Signs of a Recession May Be Starting – Important Information for Brands

The state of the economy has given mixed signals for the past two years, with expectations of a recession in the air, yet consumer spending has remained stable. However, recent indicators have left experts concerned as early warning signs are pointing towards an imminent economic downturn. This could spell trouble for marketers, especially those targeting Hispanic consumers who are predicted to be severely impacted by the potential recession.

Although many forecasts have failed to materialize, complacency has been fueled by optimistic forecasts from economists, such as the Blue Chip Consensus predicting a 2% GDP growth rate this quarter. Consumer spending has even displayed signs of improvement, with a 0.2% rise last month compared to a 1.2% decline in January, according to the Commerce Department.

Despite these positive signs, other indicators suggest troubling trends ahead. For instance, CivicScience’s survey on consumer sentiment revealed a downward trend, which serves as an early alert system compared to reports from the Conference Board and University of Michigan. Additionally, data from Decile, an e-commerce tracking firm, indicated pauses in subscriptions, along with decreases in new product prices, purchase frequency, and shopping basket sizes.

Consumer sentiment has been further dampened by considerable holiday bills due, federal job cuts, university hiring freezes, trade tariffs’ uncertainty, and fears of Immigration and Customs Enforcement raids affecting Hispanic consumer spending. CivicScience CEO John Dick stated that the shift in consumer behavior has intensified over recent weeks, reflected in CivicScience’s Economic Sentiment Index experiencing its sharpest drop since its inception in 2012. This sentiment drop was recorded even before Walmart reported cautious consumer spending in an earnings report.

The Atlanta Federal Reserve’s GDPNow forecast raised concerns when it transitioned from predicting a growth rate above 2% to a 2.8% decline this quarter, despite some moderation in the prediction. Similarly, Consumer sentiment measured by CivicScience witnessed a significant decline following early signs of economic uncertainty.

Madison and Wall revised its advertising spending forecast for 2025 to accommodate the weakening consumer sentiment which may impact advertising budgets. Alongside this, Decile reported concerning e-commerce shopping data trends, such as a rise in subscription pauses and a decline in new product price points, basket sizes, and order frequency across various categories.

While there are some positive signals like a slight improvement in consumer sentiment highlighted by Numerator’s Consumer Sentiment Tracker, caution remains as consumers express concerns about discretionary spending and reduced overall spending. Various factors have contributed to these sentiments, including accumulated household debts, uncertainty surrounding tariffs, and ongoing federal policies.

Consumers’ economic apprehensions have been a result of an increase in holiday debts, reinforced by tariff-related price uncertainties and unpredicted federal policies. Those most affected include federal workers facing job losses and Hispanic consumers experiencing a slowdown in spending. The fluctuating economic landscape signals potential challenges for businesses across sectors, urging them to brace for possible impacts that a looming recession might bring.