eCommerce Growth Slows After Q4 Surge, Still Outpaces Overall Spending

Consumers are tightening their grips on their wallets — digital ones and the ones kept in pockets and purses — and yet eCommerce sales still are showing momentum, though the gains are slowing.

This week, the Federal Reserve detailed that in the first quarter of 2025, U.S. retail eCommerce sales reached an estimated $300.2 billion, slightly below Q4 2024 levels but virtually unchanged overall and almost doubling its level before the pandemic in terms of absolute dollars.

This represents 16.2% of the $1.9 trillion in total retail sales recorded during this period. Total retail sales increased by 0.4% compared to the last quarter of 2024 and by 4.5% compared to the same quarter of the previous year. Meanwhile, eCommerce sales grew by 6.1% year over year, marking their lowest annual growth rate since Q2 2022 — but still outpacing overall sales. Still, the recent reading represents a dip from the 17.9% slice of sales that had been logged in the fourth quarter of last year.

Connecting the dots between the eCommerce-focused information and general household spending, also detailed by the central bank, it appears that consumers are focused on “must-have” items rather than “nice-to-have” items.

In separate data the Fed released this week, the Household Spending Survey data for April showed a slowdown in overall year-over-year increases in spending. The survey revealed that growth was 4.5% last month, down from 4.6% seen at the end of the year, even as inflation decelerated. The spending “rate” was remarkably uniform across income levels as households with under $50,000 in incomes reported a median increase of 4.7%, while households with incomes of between $50,000 and $100,000 and those earning more than $100,000 reported median increases of 4.4% and 4.3%, respectively.

The percentage of households that made at least one large purchase over the past four months dipped to 53.5% from 55.6% in December. The current register is the lowest since April 2020.

Purchases of electronics saw the most significant decline, down from 20.4% to 15.4% of those surveyed. The share that reported making a large purchase on electronics, home appliances, furniture, homes, vehicles and vacations also decreased in April, while the share reporting spending on home repairs increased slightly (17.9% from 17.7%).

Looking ahead, the median expectation for spending growth over the next 12 months increased to 3.3% in April from 3% in December. We note that this may be correlated with higher inflation expectations. As PYMNTS recently reported, year-ahead inflation expectations as measured by the University of Michigan surged to 7.3% this month, a register unseen since November 1981.

The median expected year-ahead growth in everyday essential spending, or daily living expenses related to what one absolutely needs, increased to 4.9% in April from 4.1% in December, meaning that the surge in expected spending is disproportionally allocated to basic purchases. Growth in food expenses in particular rose from 4.8%  to 5.7%. Unsurprisingly, the median expected growth in non-essential spending decreased from 1.5% in December to 1% in April, the lowest such reading since August 2020.

And as noted by PYMNTS CEO Karen Webster in a recent column, amid the volatile tariff situation, PYMNTS Intelligence data finds that 78% percent of consumers say they will cut back (buy less or buy cheaper). “Even a decrease of 2% in overall spending across that group would amount to a loss of $92 billion every year to the U.S. economy,” she wrote.

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