GDP Shows Consumer Resilience Under Pressure as CEOs Eye Recession

Tariffs are in limbo. GDP is shrinking. CEOs are pessimistic. And consumers are caught in the middle of all the uncertainty, buffeted by rising prices and an uncertain employment picture.

On Thursday (May 29), the Bureau of Economic Analysis released its latest estimate of GDP – and noted only a slight revision to the decline in the economy. GDP shrank at an annualized 0.2% pace, a bit better than the 0.3% previously estimated.

The revision reflects stronger-than-expected investment, particularly in private inventories, but was partly offset by a downward revision in consumer spending. Imports surged 42.6%, dragging heavily on GDP due to their negative accounting impact as businesses scrambled to get inventory in the face of looming tariffs that launched in April. This was the single largest contributor to the contraction.

Consumer spending slowed to +1.2%, with noticeable pullbacks in durable goods (particularly vehicles) and in services like recreation and financial services.

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As for inflation, it’s still sticky. The PCE (personal consumption expenditures) price index held steady at 3.6%, while the core PCE (excluding food and energy) was revised slightly down to 3.4%.

The Corporate Picture

Preliminary estimates show corporate profits fell by $118.1 billion in Q1, reversing the strong $204.7 billion gain in Q4. This downturn reflects pressure from rising input costs and weaker demand, particularly in consumer-facing and export-sensitive industries.

With the next GDP release due June 26, more complete data, including industry breakdowns, may offer further clarity. For now, the data suggests a fragile start to the year, shaped by volatile trade flows, cooling consumer momentum and firm inflation dynamics.

A wild card still remains, as a federal court handed down a ruling Wednesday (May 28) that blocks Trump’s tariffs. That ruling is under appeal — and where there’s uncertainty, there’s a cloudy employment picture, which has been illustrated by other data released this week.

As measured in May, CEO sentiment took a dramatic downturn, as The Conference Board Measure of CEO Confidence was released Thursday (May 29).

The headline number dropped by 26 points to a reading of 34 — its lowest level since late 2022. This steep decline, the sharpest quarter-over-quarter drop in the survey’s nearly 50-year history, signals a marked shift toward pessimism.

The current mark is 16 points below the 50-point threshold, which indicates that negative responses outweigh positive ones. All measures declined. The report revealed broad-based pessimism across all components of the confidence measures.

CEOs’ assessments of current economic conditions fell the most, with 82% stating that the situation had worsened compared to six months ago, sharply from just 11% in the previous quarter.

A Dimming Outlook

Looking ahead, expectations also deteriorated significantly. Most CEOs now foresee further economic weakening in the next half-year, both at the macro level and within their own industries. Specifically, 64% anticipate a worsening economic outlook, a sharp rise from 15% in Q1. Recession fears remain high, with 83% of CEOs expecting a downturn in the next 12–18 months.

Geopolitical instability emerged as the foremost concern for CEOs this quarter, followed by worries over trade and tariffs. Regulatory uncertainty also ranked high, while concern over cyber threats — previously a dominant issue — fell to fourth place.

Hiring plans also reflected caution. While most CEOs (44%) intend to keep their workforce size unchanged, the proportion expecting to expand hiring declined slightly from 32% to 28%. Meanwhile, the share anticipating a reduction in staff ticked up from 27% to 28%.

On the compensation front, over half of CEOs (53%) said they plan to raise wages by 3.0–3.9% over the next year. Notably, the share of those considering more modest increases in the 2.0–2.9% range grew from 24% to 34% — and we note that this range would fall below the PCE trends discussed above.

Given the headwinds to hiring, an uncertain picture for wage growth and sticky inflation, consumer resilience will be tested in an environment where, as PYMNTS Intelligence has found, a growing percentage of households are finding that proactive planning for their financial futures — and spending plans — are becoming solely reactive to a constantly shifting macro landscape.