Wells Fargo Warns: Consumer Caution Signals Deeper Economic Strain

Discretionary services spending has declined in recent months, raising fresh concerns about consumer strength, according to Wells Fargo. The bank emphasized that this type of spending typically falls only during or immediately after recessions, making the recent drop a potential warning sign. Revised data showed Q1 consumer spending grew just 0.5%, far below the initially reported 1.8%, while services spending was cut from 2.4% to just 0.6%.

A Wells Fargo bank, pymnts.com.

Wells Fargo economists Tim Quinlan and Shannon Grein argue that the idea tariffs haven’t impacted the economy is misleading. Some of the apparent strength came from consumers making early purchases—like cars and appliances—to avoid future price hikes. At the same time, declines in areas like air travel, auto maintenance, and ride-sharing suggest that household budgets are stretched. Although inflation remains low, the bank warns that consumers are showing signs of caution, with spending patterns shifting toward essentials and away from non-essentials.