CHICAGO, August 11, 2025 —Fearful that tariffs will trigger another spike in inflation, 58% of consumers intend to cut their spending over the next 12 months, according to the latest research on consumer sentiment from the University of Michigan.
When asked what indulgences they would most likely curtail, 14% of the respondents said eating in restaurants.
The findings indicate the public is expecting a devastating fallout from the Trump Administration’s tariffs, even though the current and near-term impact remain unclear. The University’s Index of Consumer Sentiment, a highly regarded gauge of consumers’ outlook for the economy, fell five percentage points in August and 13.7 points from a year ago.
The decline marks the first slide in consumer confidence measured by the university since April, when Trump announced his plan to levy trade duties on most goods imported into the U.S. The current gauge of consumer sentiment was taken by the university after a second wave of tariffs was announced, many of them higher than the 10% Trump had initially imposed.
The main reason for the decline in confidence, according to the university, is the public’s assumption that inflation could soar as it did in 2022, when food costs for the food-away-from-home industry skyrocketed by an historic 8.3%.
At that time, 53% of consumers told University of Michigan researchers they intended to curb their spending, while 36% indicated they’d continue to spend at the same rate.
In the August assessment, 58% said they intend to tighten their belts and 24% indicated they’d stick with their current budgets.
Other data suggests the public’s fears of an inflation spike are to date unfounded. As the university’s researchers noted, the Consumer Price Index for July, the most recent month for which the federal measure of inflation is available, declined by 0.1%.
The news at that time was less positive for the FAFH business. Menu prices rose that month by 0.2%, compared with a 0.1% decline in grocery prices.
The higher cost of buying meals prepared outside the home is seen as a major reason why consumers are visiting restaurants less often.
The University of Michigan also cited fears of widespread layoffs as a reason for consumers’ economic worries. Yet the national unemployment rate has essentially held steady at a healthy 4.2%.
“Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April when reciprocal tariffs were announced and then paused,” Joanne Hsu, the university’s Director of Consumer Surveys, said in an analysis of the new Confidence Index. "However, consumers continue to expect both inflation and unemployment to deteriorate in the future.”
A realization of the public’s fears would pose significant financial challenges for the FAFH business. Many operators say they’re already struggling to maintain margins as labor costs continue to climb and food costs have yet to fully decline from the nosebleed levels of 2022.
Many publicly owned restaurant chains reported better results for the second quarter of this year than they did for the prior three-month period. But many are still reporting soft or declining traffic, with most of their sales increases coming from price hikes rather than a growing customer base.
As Managing Editor for IFMA The Food Away from Home Association, Romeo is responsible for generating the group's news and feature content. He brings more than 40 years of experience in covering restaurants to the position.
Cover image courtesy: Closed Loop Project