U.S. Consumer Spending Loses Momentum in August: What the SMI Reveals

Dining stays strong—even as overall spending cools, restaurants keep the momentum.

The latest Visa U.S. Spending Momentum Index (SMI) shows a notable cooling in consumer activity during August. After months of relative resilience, overall spending slipped into contraction territory, reflecting a more cautious mindset shaped by a weaker labor market, slowing wage growth, and new economic headwinds.

Spending Momentum Cools

The SMI fell 2.4 points month-over-month (MoM) to 97.7 (seasonally adjusted). A reading below 100 signals contraction—fewer consumers are increasing their spending compared to prior months.

• Discretionary spending: down 2.9 points MoM

• Non-discretionary spending: off 0.5 points MoM, though still in expansion for the second consecutive month

• Gas spending: contracted sharply despite lower prices

• Restaurant spending: the only category to rise, up 2.1 points MoM, showing that dining out remains a priority for many households

Labor Market Weakness

The softer SMI is closely linked to labor dynamics:

• Job creation slowed to just 22,000 new positions in August, compared with an upwardly revised 79,000 in July.

• Wage growth eased from 3.9% YoY in July to 3.7% in August.

• Estimated income growth decelerated to 4.4% YoY, down from 4.9% the prior month.

With incomes rising more slowly and job gains limited, consumers had less flexibility for non-essential purchases, pulling back particularly on discretionary items.

Tariffs and Gas Prices: Contrasting Forces

August also marked the implementation of higher tariff rates, raising the cost of imported goods and further discouraging discretionary spending.

In contrast, a 7.6% YoY decline in gas prices gave households some relief at the pump. Many redirected those savings toward food and dining, which explains the relative strength of non-discretionary and restaurant categories in an otherwise weak month.

What It Means for Hospitality and Retail

The August SMI underscores an important shift:

• Consumers are trading down in goods but trading up in experiences, particularly in dining.

• Restaurants and essential services remain resilient, while discretionary retail feels the pinch.

• Macroeconomic headwinds—slower job growth, softer wages, tariffs—are directly shaping spending choices.

For hospitality leaders, the lesson is adaptability: success lies in offering value-driven experiences and meeting consumers where they are—seeking connection, authenticity, and affordable indulgence even in uncertain times.

Final Word

While the slowdown in overall spending momentum is a cautionary signal, the continued strength of restaurants and non-discretionary categories proves that consumers are still willing to spend—just more selectively. Businesses that align with this mindset, balancing value, essentials, and memorable experiences, will be best positioned to weather the shifts in consumer behavior.