Consumer Outlook Brightens, Slightly

The Visa Business and Economic Insights (VBEI) midyear report paints a brighter picture than other research that's been released—especially in regard to the state of the consumer.

The Visa research followed The Conference Board's monthly consumer confidence report, which showed a slight gain for June.

America at 250: Retail, Style and Industry, 1826-1850

The Supplement Brands Doing Big Business on TikTok Shop

Margot Robbie, Henry Cavill Toast Opening of RH London, The Gallery in Mayfair

In the Visa study, VBEI researchers acknowledged that higher energy costs are squeezing household budgets and creating fresh challenges: "a surge in business investment—particularly in artificial intelligence, clean energy and strategic industries—is helping offset the strain on consumers and keep the economy moving forward."

As a result, the authors of the report are calling for the global economy to grow 2.4 percent this year. That rate of growth is being pressure by higher levels of inflation.

According to separate data from the Council on Foreign Relations and the International Monetary Fund, the global inflation rate is pegged to average approximately 4.5 to 5 percent this year. More advanced economies are seeing inflation rates of about 2 percent, with emerging economies feeling much more pressure.

The VBEI report found that consumers are adjusting to higher costs. They are also more focused on value.

"As digital commerce continues to reshape how people shop and pay, consumers are finding more ways to compare prices and stretch their budgets, helping to keep inflation in check," said Wayne Best, chief economist at Visa. "We're also seeing business investment rising sharply, with companies building out AI, clean energy and stronger supply chains at levels we haven't seen since 2010—a trend that is helping support global growth."

The key themes shaping the global economy center around more resilient consumers (who are adjusting rather than retreating in their spending), digital commerce serving as a relief valve on prices and a wave of business investment.

Visa said the VBEI data show that, even as higher costs weigh on household budgets, discretionary spending is holding relatively steady. The report's authors said there's evidence that consumers "are adapting their behavior and seeking deals rather than pulling back sharply." And more often than not, the deal-seeking behavior is occurring online as consumers can more easily compare prices.

The report also found that smaller global cities are seeing online adoption rates double. "The trend spans markets as varied as Bern, Switzerland, and San Juan, Puerto Rico, where online shopping has climbed sharply since 2019," the report stated. "As more shoppers gain the power to compare prices and find alternatives, these markets are seeing stronger competition and lower inflation, helping ease the pressure on households as energy costs climb."

Regarding global investments, the report found that the economy has entered its strongest industrial investment cycle since 2010. The report found that capital spending by the world's three largest economies (the U.S., EU and China) is rising in tandem as businesses invest in AI, transition to cleaner energy sources and focus on creating a secure and strategic supply chain.

In the consumer confidence report, a modest lift in June was primarily driven by a pullback in oil and gasoline prices that offered households temporary relief from persistent inflation anxieties. The Conference Board said on Tuesday that its Consumer Confidence Index inched up to 91.2 from a downwardly revised 90.6 in May. While the slight rebound signals a stabilization from earlier spring lows, partially buoyed by an extension of the U.S.–Iran ceasefire agreement, overall sentiment remains historically subdued.

Chief Economist Dana M. Peterson said while falling energy costs temporarily softened inflation fears, underlying pessimism regarding the broader economy continues to linger among consumers. The uptick was entirely fueled by shifting views on the future, as the Expectations Index jumped three points to 74.4 on hopes of better business conditions and rising household incomes ahead.

In contrast, Americans grew notably more anxious about the immediate present. The Present Situation Index tumbled three points to 116.4. Driving this drop was a cooling labor market, with the percentage of respondents stating that jobs are "hard to get" surging to 22.5 percent—the highest level seen since January 2021. This divergence highlights a "glass half-full, glass half-empty" economic environment, where long-term optimism is running parallel to mounting concerns over immediate job security.

For retailers and brands, this data implies that while the consumer is resilient, winning their business requires a hyperfocus on value, robust digital channels and back-end efficiency.

Because consumers are actively adapting to inflation by price-comparing online rather than cutting spending entirely, a trend rapidly expanding into smaller global cities, brands need to make sure their digital e-commerce experiences are seamless and highly competitive as well as optimized for deal-seeking shoppers.

In addition, the contrast between long-term consumer optimism and immediate anxiety over a cooling labor market means messaging should emphasize practical value and financial reassurance. With major corporate investments surging into supply chains and artificial intelligence, retailers and brands that leverage these same technologies to streamline operations and offer better pricing will be best positioned to capture market share in this cautious, value-driven discretionary spending environment.

Everything You Need to Know About Digital Product Passports

DTC Explainer: Everything You Need to Know about Direct-to-Consumer