Fitch Ratings has warned that U.S. consumer spending is slowing sharply as households face pressure from a weakening labor market and higher inflation linked to tariffs.
The ratings agency said consumer demand, which accounts for about two-thirds of the U.S. economy, is under strain. Slower job growth is reducing household income, while tariffs are driving up the cost of goods, further squeezing budgets.
Economists say the slowdown raises concerns about stagflation — a mix of weak growth and persistent inflation. Similar warnings have been echoed in recent reports, pointing to rising costs for everyday goods and fewer opportunities for wage growth.
The situation comes as new tariffs on imports add to inflationary pressure. Businesses are expected to pass many of these costs on to consumers. Fitch noted that such dynamics could weaken overall economic momentum in the months ahead.
A prolonged pullback in consumer spending would pose a challenge to the wider economy, as it risks slowing growth and reducing confidence among households and businesses.
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