Tariff indigestion? Nope: Takeout and eating out still going strong in good sign for the economy.

Despite consumer anxiety surrounding ongoing trade wars, spending remains strong, particularly in the food and beverage sector, indicating economic resilience. April saw a sharp increase in spending on purchased food, corroborated by retail sales data and a 10% year-over-year increase in restaurant reservations, according to OpenTable. While the National Restaurant Association expresses caution, economists suggest that relaxed tariffs, low unemployment, rising incomes, and slowing inflation contribute to continued consumer spending, which accounts for approximately 70% of U.S. economic activity, and forecasts predict GDP growth of 3% or more in the second quarter.

Analysis

The U.S. economy presents a compelling divergence between stated consumer anxieties regarding trade wars and observed robust spending patterns, particularly within the food and beverage sector. April data revealed a significant uptick in spending on purchased food, a trend corroborated by retail sales surveys and a notable 10% year-over-year increase in restaurant reservations reported by OpenTable. While broader household spending decelerated in April, this appears largely attributable to a tariff-related pull-forward of expenditures in March, with subsequent relaxation of most tariffs potentially mitigating future headwinds. This resilience in consumer activity is buttressed by strong macroeconomic underpinnings: low unemployment, rising personal incomes, slowing inflation, and continued job growth. Despite a 0.2% contraction in Gross Domestic Product in the first quarter of 2025, the first in three years, forecasts anticipate a rebound to 3% or higher growth in the second quarter. Consumer spending, which constitutes approximately 70% of U.S. economic activity, is on track to exceed its modest 1.2% growth rate from the first quarter. Although the National Restaurant Association indicates a cautious outlook among operators, the prevailing strength in consumer behavior and supportive economic indicators suggest this pessimism may be excessive, underscoring the notion that consumer actions are currently a more telling economic indicator than expressed sentiment.

Key Decisions for Investors

• Investors should prioritize actual consumer spending data, particularly in discretionary categories such as restaurants and takeout, over sentiment surveys when assessing near-term economic vitality, given the current disconnect.
• The sustained strength in consumer spending, supported by a robust labor market and an apparent easing of tariff impacts, may offer continued opportunities in consumer-facing industries, though monitoring restaurant operator sentiment for leading indicators of change remains prudent.
• The projected Q2 GDP growth of 3% or more, coupled with resilient consumer expenditure, could alleviate immediate recessionary fears, potentially warranting a constructive outlook on economic expansion and related asset classes.