New research shows the impact of inflation, tariffs on consumer spending

Has there ever been a good year for predicting future macroeconomic shifts? Maybe not. But if we had to nominate one, 2025 would not make the shortlist. 

It’s been a challenging year to know what’s coming next:

• Tariffs and supply chain shifts: Tariffs and trade policies are adding cost pressure—especially for brands sourcing internationally who need to rethink their supply chains. When the average cost of a supply chain disruption is $1.5 million per day, that’s understandable anxiety.
• Soaring costs of inputs: Raw material volatility thanks to forces like climate change is leading to unpredictable costs and slower innovation cycles. The price of cocoa, for example, has risen from about $2,000 per metric ton in 2022 to $12,000 by 2025.
• Consumer spending and inflation: Inflation and shrinkflation have made consumers more price-conscious and skeptical. Nearly 47% of shoppers are actively switching to lower-cost store brands and using coupons more frequently to offset this loss of purchasing power.

Both brands and consumers are reacting to a lack of clarity with confusion and loss of confidence. 

“Could the macroeconomic situation continue to change in ways we can’t predict?” 

“What production process will most likely mitigate future risk for our products?” 

“Should we make a significant purchase now, or defer until we feel the economy is in a more stable place?”

“How does inflation affect consumers and consumer spending?”

At Highlight, our mission is to bring clarity and confidence to the product development lifecycle–regardless of the macroeconomic environment. In times of relative uncertainty, a data-driven roadmap is more important than ever. 

While the specifics may vary for your particular consumer set or category, start with these consumer insights to learn what today’s consumers are thinking.

Consumers are facing more cost of living pressures

Consumers continue to feel the effects of inflation. In the 12 months through May 2025, the US Consumer Price Index rose 2.4%, with food inflation even higher at 2.9%.

What’s the real impact of inflation on consumer spending?

Beyond the official statistics, we wanted to know how consumers are perceiving and feeling these changes in living costs like groceries. In a Highlight survey taken the week of July 7, 2025, we polled our proprietary panel of nationwide consumers, achieving 1,000 completions with an even gender split (500 men and 500 women). 

Among other questions, we asked them: In terms of your personal finances, how do you feel today compared with this time last year?

62% of respondents said money feels somewhat or much tighter than a year ago, while only 10% said money feels somewhat or much easier than a year ago. Over a quarter of respondents (28%) say that money feels about the same as compared with this time last year.

The fact remains: The majority of respondents feel they are doing worse off financially than they were a year ago. 

62% of respondents said money feels somewhat or much tighter than a year ago

Effects of inflation on consumers: How consumer behaviors have changed to manage tighter budgets and higher costs

In an open-ended question, respondents were given the opportunity to describe how their consumption habits and saving strategies have changed in their own words. Highlight asked: Thinking about your everyday routines, purchases, or habits–is there anything you're doing now that you weren't doing a year ago? Here’s the full breakdown of respondents’ qualitative responses:

No/Not really: This or similar phrases like "Nope it's the same," "No changes," "nothing," "I don't think so," or "everything is basically the same" appears 93 times. This indicates a significant portion of the respondents haven't changed their habits much.

“I shop the same overall.” - She/her, 47 years old, North Carolina

Exercising more/Working out more: This theme appears 47 times. Many respondents mentioned exercising, working out, going to the gym, walking more, or increasing physical activity.

“Drinking more iced coffee, working out more, traveling less, reading audiobooks more.” - He/him, 36 years old, Illinois

Eating healthier/Better food choices: This theme appears 39 times. Responses include eating healthier, eating more vegetables, focusing on protein, buying organic, or making healthier food choices.

“I'm eating better. I'm putting better stuff in my body. I'm working out more. Also I'm buying different things that I need for a healthier life.” - He/him, 43 years old, Texas

Budgeting/Saving money/More conscious of spending/Looking for sales: This broad category appears 65 times. Many people are trying to save money, be more budget-conscious, look for sales, use coupons, or buy less.

“[I’m] budgeting better. Picked up a second job.” - He/him, 39 years old, Tennessee

Shopping online more: This response appears 25 times.

“I visit Sam's Club more often for bulk purchases and savings. I also shop online more frequently for pick up or shipped items from CVS.” - She/her, 61 years old, Florida

Cooking more/Eating at home more: This theme appears 14 times.

“I’m watching my money more as things get more expensive. We’re also eating out less as restaurant prices have risen tremendously.” - She/her, 58 years old, Pennsylvania

What consumers are (and aren’t) doing to save money and budget wisely

In this same Highlight survey of 1,000 Americans, we also asked respondents: What are you doing to better manage your spending?

In a multiple choice question where respondents were invited to select all that apply, this is how panelists responded, from most popular to least popular responses:

• 67% of respondents are eating at home more often
• 57% are shopping sales more actively
• 55% are buying fewer non-essential products
• 54% are holding off on major purchases (e.g., tech, furniture)
• 43% are avoiding eating out
• 39% are switching to more affordable brands
• 33% are canceling subscriptions
• 32% are traveling less
• 30% are choosing private label/store brands
• 29% are buying in bulk
• 23% are using budgeting apps or tracking spending more closely
• 17% are cutting back on wellness and/or beauty spending
• 9% said none of the above

What aren’t consumers willing to sacrifice in order to save money?

Even as many Americans are changing up their habits–especially their spending habits–there are expenses that respondents stated they would not be willing to change. 

In a multiple choice question, Highlight asked respondents: Which of the following, if any, are you not willing to sacrifice–even when budgets are tight? (Select up to three.) These were their answers, from most to least popular:

• 42% of respondents are not willing to give up high-quality food & beverages 
• 39% say they are not willing to give up their self-care and wellness routines
• 31% don’t want to give up their streaming services or other entertainment
• 30% say they won’t part with their preferred brands
• 29% won’t give up travel or experiences
• 23% said they won’t give up products that make them feel good or confident
• 15% said they won’t give up conveniences like delivery
• 7% said they won’t give up products that support sustainability of ethics

Highlight also gave respondents the opportunity to say what habits they are not willing to change or products they are not willing to give up in their own words. 

Overall, the qualitative results mirrored the quantitative: Consumers mentioned over and over again that they are unwilling to give up buying food, especially healthy, quality, or favorite foods.

We couldn’t help but wonder: Did the qualitative answers vary at all when segmented by gender?

So we did–and yes, there were some fun patterns to note:

What female consumers aren’t willing to give up even when budgets are tight

While respondents across genders agreed high-quality food is their non-negotiable item, women most frequently mentioned their unwillingness to give up coffee specifically. Their open-ended responses mentioned iced coffee, Starbucks, Dunkin, “good coffee,” “homemade coffee,” and other specific brands.

“I MUST have my favorite coffee even though it's more expensive even now.” - She/her, 61 years old, Iowa

Women respondents were also more likely to mention these topics in their open-ended answers:

• Specifically, healthy food was mentioned approximately 40 times, often paired with words like “quality,” “organic,” and “produce.”
• Personal care and self-care purchases were mentioned approximately 30 times, including terms like manicures, skincare, hair care, beauty, and nails.
• Pets and pet products (dog food, cat food, vet care, pet supplies and more) were mentioned approximately 30 times.

“I still buy extra healthy food. The healthier the food, the more it will cost. I will not buy cheap food.” - She/her, 66 years old, Arizona

“Hair color and nail appointments.” - She/her, 55 years old, Texas

“My dog's food and heartworm medication. I will always make sure to buy her the good healthy food she is on and make sure she has her heartworm medication to take each month.” - She/her, 25 years old, Florida

What male consumers aren’t willing to give up even when budgets are tight

Male respondents also placed a premium on high-quality food and eating well. When it comes to themes that were repeated most frequently in their open-ended responses, nothing else came close to quality food, which was mentioned upwards of 60 times.

“I will still purchase organic produce and look for items that are healthier.” - He/him, 43 years old, Arizona

But when we look at the honorable mentions, a few stand out:

• Men do not want to part with their streaming services, television, and other entertainment (mentioned approximately 20 times)
• Men also mentioned travel, vacations, and getaways as a non-negotiable (mentioned approximately 20 times)
• Men mentioned not wanting to give up purchases that support a healthy lifestyle (eating, gym, working out), but mentioned this less frequently than female respondents did (approximately 15 times versus 40 for women)

“I pay for a number of TV streaming services that I would feel deprived not to have.” - He/him, 55 years old, Texas

“My grocery bill and gym membership.” - He/him, 47 years old, Oregon

“We still go on trips and vacations.” - He/him, 50 years old, New York

“My kid’s favorite snack: She loves Takis. They’re a bit expensive but I give up things for her. She is all that matters.” - He/him, 40 years old, North Carolina

Takeaways for helping consumers with tighter budgets in the face of tariffs and inflation

It’s normal to feel wary of what still could come our way in 2025, but it’s not helpful to worry. Now’s the time to take action.

In this year’s edition of Highlight Spark, we asked all our panelists to share their thoughts and advice for other brands looking to meet consumer needs and safeguard their product success. Here’s what Jon Silverman, VP at Spindrift had to say: 

Brands can get a full how-to guide from Highlight’s Head of Customer Development, Carly Shira. Her on-demand webinar provides a checklist for CPG and retail brands to drive high-impact innovation and protect the core through smarter renovation.

Watch Carly’s 30-minute session and download your checklist to countering tariffs and supply chain challenges today.

Continue reading

• Managing Supply Chain Disruptions (Can your customers tell you how to handle disruptions in your supply chain?)
• Price Sensitivity Methods in Response to Tariffs (Which pricing research method—Gabor-Granger or Van Westendorp—is best for guiding tariff-related pricing decisions?)
• Choosing a Contract Manufacturer (Compared to technical specs, how much does consumer experience matter when picking a contract manufacturer?)
• Using Consumer Insights to Drive Cost Reduction Strategies (How can focusing on what customers value help you reduce product costs the smart way?)