Early warnings signal a recession may already have begun—what brands need to know

Recession seemingly has been just around the corner for well over two years, yet the economy and consumer spending just kept chugging along. But now a slew of early warning signs that come from sources weeks or months ahead of most mainstream measures have started flashing bright red, signaling the hard landing may finally be at hand. The increasingly gloomy outlook could pose challenges for marketers across a range of industries, particularly those catering to Hispanic consumers, who experts say could be especially hard hit. See all of Ad Age’s 2025 Agency A-List winners here Certainly all the recession predictions that never panned out have fueled complacency. And the Blue Chip Consensus forecast of leading economists remains for gross domestic product (GDP) to grow nearly 2% in the current quarter. Consumer spending even got a little better last month, up 0.2% vs. down 1.2% in January, according to the Commerce Department. But other early warning signs have signaled disturbing trends in recent weeks. Those include a consumer sentiment survey from CivicScience that generally reports ahead of those from the Conference Board and University of Michigan, plus data from e-commerce data tracking firm Decile that show an uptick in subscription pauses and declines in new product price points, purchase frequency and basket sizes. Series of bad signals Fueling consumer pessimism are hefty holiday bills coming due, federal job cuts and hiring freezes at universities, uncertainty about tariffs and fears about Immigration and Customs Enforcement raids, which have hit spending by Hispanic consumers, according to CivicScience CEO John Dick. His company’s Economic Sentiment Index on Feb. 10 had the steepest two-week drop it’s ever had since its 2012 launch. The decline has continued at a slower pace over the past four weeks. CivicScience’s sharp sentiment drop was reported 10 days before Walmart executives in an earnings report cited cautious consumer spending that tempered the retailer’s full-year forecast. That sparked a 0.4% decline in the S&P 500 Index on Feb. 20, the beginning of a decline that would see the index shed 10% of its value. Within days of Walmart’s earnings report, University of Michigan and Conference Board consumer sentiment reports also showed sharp declines. Then on March 3, the Atlanta Federal Reserve, which publishes a GDPNow forecast of GDP growth, flashed what might be the brightest red warning light of all. The Atlanta Fed shifted from predicting growth of more than 2% this quarter to a decline of 2.8%. GDPNow’s prediction since has moderated, but still projects a 2.1% decline this quarter vs. a consensus prediction of 1.7% growth from Blue Chip economists. Consumer sentiment takes a plunge Consumer sentiment measured by CivicScience bounced back from a spring decline last year, but in February posted its steepest two-week drop in the history of the firm’s index Source: CivicScience Media measurement blog Tracking TV, social and digital updates Click here Citing some of the same factors driving consumer sentiment lower, including the impending impact of higher tariffs and fewer foreign workers in the U.S., Madison and Wall on March 18 reduced its full-year 2025 forecast for advertising spending almost a percentage point to 3.6%. The firm expects the slowdown to be fully felt in the back half of the year, with 4% growth in the first quarter. E-commerce signs of worry E-commerce shopping data are also flashing some warning signs. Customer data and analytics platform Decile is seeing a rise in subscription pauses combined with declines in new product price points, basket sizes and purchase frequency in more discretionary categories. “A pause is the new cancelation,” Cary Lawrence, founder and CEO of Decile, said of the subscription pause phenomenon. “Everyone’s unsure. They don’t necessarily want to get rid of everything, but they’re wary.” The average price point of new product launches by clients that Decile tracks is down so far in 2025 to $95 from $107 in 2024, Lawrence said. Brand marketers at recent conferences have been talking more about the need to launch products at lower prices, as well as concerns about profit margins, she added. Order frequency also has been declining across all five product categories Decile tracks—home goods, fashion, health and beauty, dietary supplements, and food and beverage, Lawrence said. Average ticket size has declined in three of those categories—the most discretionary ones—home goods, fashion and supplements. Not all early signals are flashing red. One, at least, is flashing yellow. Numerator, a unit of Kantar that collects purchase and survey data from a panel of shoppers who share their online and offline receipts, reported a slight uptick in its Consumer Sentiment Tracker last month. And its tracker has been fairly stable for well over a year. However, there were a couple of worrying signs even in that data. The percentage of consumers who say they feel comfortable making discretionary purchases was down one percentage point to 40%. And the percentage who say they’re spending less overall was up 1.5 points from January to 35%. Why consumers are worried A host of factors is weighing on people’s economic sentiment, said CivicScience’s Dick, who last June predicted a recession would begin by late last year or early this year because of a similar if less steep Economic Sentiment Index decline spotted last spring. “The consumer proved very resilient through last summer into the holiday season,” Dick said. “But it was only a matter of time until household debt piled up to a certain level, and prices weren’t coming down.” Early this year, holiday bills coming due coinciding with uncertainty about future prices fueled by new tariffs and almost daily threats of more to come, he said. Tracking the latest Omnicom-IPG merger news and analysis “Unpredictable federal policies seem to be the straw that broke the camel’s back,” Dick said, adding that bad news can be easier for people to process than uncertainty. Those federal policies are particularly pronounced for federal workers hit by waves of firings and agency closures and on Hispanic consumers, he said. Because CivicScience built its consumer sentiment index on a tracking survey business aimed mainly at gathering data for brand marketers, it can get data faster and with more detail into factors driving trends than some other surveys. The Economic Sentiment Index is based on 1,600 respondents every three days, so it can report updates on a rolling three-day average, plus provide looks into the segments fueling changes. That’s one reason CivicScience sees that Hispanic sentiment, driven by fear of deportations and ICE raids, is a key factor in spending uncertainty, Dick said. “A déjà vu we’re having right now is a dramatic pullback on spending by Hispanics,” he said. "Very similar to what we saw in 2017 within weeks of the election, Hispanic consumer confidence started to fall for fairly obvious reasons.” CivicScience data from more than a million respondents shows the proportion of people who say their desire to leave the house has decreased over the past six months rose from 25% last year to 35% this year. That reluctance to leave the house is driven heavily by the 8% of respondents who say they fear ICE raids. The other déjà vu factor in current numbers is with the early pandemic period of 2020, the last time the U.S. had a sharp recession, Dick said. “There are very uncanny similarities to right now and the early days of the pandemic in terms of how consumers are behaving,” he said. “It’s just very fear-driven.”

Early warnings signal a recession may already have begun—what brands need to know

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