Why Consumer Behavior Matters in Macroeconomic Forecasting

Consumer spending habits, savings trends, and shifts in sentiment aren’t just reflections of current events — they’re critical signals used in macroeconomic forecasting. At Avidian Wealth Solutions, we recognize that data alone doesn’t drive the economy — people do. That’s why we integrate behavioral insight to better understand  economic trends, build resilient, stress-tested portfolios, and develop a forward-looking investment strategy for our clients.

This article is intended for informational purposes only and does not constitute investment advice. Avidian Wealth Solutions is a fiduciary financial advisory firm headquartered in Houston, Texas. Always consult a qualified financial advisor before making investment decisions.

Why is consumer behavior important in economics?

Consumer behavior plays a central role in economic outcomes. In fact, household consumption accounts for about two-thirds of U.S. GDP. Every choice from purchasing a new vehicle to postponing a vacation ripples through industries, affects business earnings, and influences national economic indicators.

From a macroeconomic perspective, consumer behavior provides early clues to potential changes in growth, inflation, employment, and policy direction. Understanding these trends helps economists and financial professionals make more accurate macroeconomic forecasts, and in turn, helps firms like Avidian align investment portfolios with market realities.

Behavioral trends in macroeconomic forecasting

Macroeconomic forecasting is never an exact science, but it becomes more effective when grounded in real-world data on how people actually behave. At Avidian, we use consumer behavior as a key input in assessing:

• Potential inflection points in the business cycle
• Risk exposure across asset classes

Read our Key Considerations for Investing in the Real Estate Sector

Here are a few ways consumer behavior influences our macro view and shapes investment strategy.

Credit vs. debt usage

How households use credit tells a deeper story about financial stability. In our assessment of the market, we ask a number of questions, including the following:

• Are consumers relying more on credit cards to cover everyday expenses?
• Are auto loans and mortgages becoming more difficult to obtain or sustain?

These patterns give insight into long-term investment risk management. Rising delinquency rates or overleveraged households might signal economic stress ahead. At Avidian, we monitor these signals as part of a broader effort to maintain risk-aware positioning in client portfolios.

Learn more: How to Prepare for Potential Changes to Mortgage Interest Deductions

Spending categories

It’s not just about how much people spend, but where they’re spending. A surge in spending on luxury goods might suggest strong consumer confidence, while growth in discount retail or essential goods may reflect tighter household budgets.

Changes in spending categories often point to sector-specific tailwinds or headwinds. We consider these shifts when evaluating sector allocation and rebalancing strategies within diversified portfolios.

Evaluating consumer sentiment

Beyond numerical data, macroeconomic forecasting also depends on understanding consumer psychology. That’s why surveys like the University of Michigan’s Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index are widely followed.

While sentiment doesn’t always align with behavior in the short term, persistent changes often precede major economic shifts. Declining consumer confidence can signal reduced demand, potential layoffs, and slower GDP growth — all factors that affect asset pricing.

This is another area where Avidian’s philosophy comes to life: blending technical analysis with behavioral insight to develop a balanced, adaptive investment strategy.

The economic feedback loop

Why is consumer behavior important in economics? Because it both reacts to and influences fiscal and monetary policy. For example, let’s say:

1. The Federal Reserve raises interest rates to cool inflation, making credit more costly.
2. As a result, consumers pull back on spending and borrowing.
3. Businesses then adjust production, pricing and hiring strategies.
4. Economic growth slows, potentially leading to a policy reversal.

This cyclical feedback loop underscores how deeply interwoven consumer behavior is with economic performance, and by extension, with market outcomes.

Avidian doesn’t simply respond to policy decisions: we evaluate how consumers are reacting to those decisions. This helps us consider potential scenarios and inform our portfolio management process accordingly.

Real-world examples of behavioral economics at work

Covid-19

The pandemic serves as a prime example of how macroeconomic trends are inseparable from consumer psychology.

In 2020, consumer behavior underwent one of the fastest transformations in modern history. Discretionary spending collapsed, personal savings soared, and new priorities emerged. Demand for digital services, home improvement, and delivery platforms surged, while travel and hospitality industries contracted. Understanding these behavior-driven changes allowed some investors to adapt early.

Subsequent inflation, interest rates, and household performance

From 2022 to 2024, inflationary pressures and rising interest rates again reshaped consumer behavior. Big-ticket purchases were delayed, credit costs rose, and spending focused more on essentials. These shifts provided insight into potential economic slowdowns and market volatility — key factors in investment risk management.

By tracking consumer adjustments, investors can better position themselves to pivot strategies in anticipation of rate stabilization and potential market reacceleration.

How Avidian uses consumer behavior to strengthen investment strategy

At Avidian, we take a human-centric approach to data. We don’t view consumer behavior in isolation but as part of a dynamic, interconnected system that drives markets and informs sound decision-making.

Here’s how we integrate behavioral insights into our investment strategy and portfolio management:

• Sector and asset class exposure: Adjusting allocations to align with consumer-driven demand cycles
• Risk modeling: Evaluating the impact of changing consumer sentiment on earnings, inflation, and growth
• Scenario planning: Using behavioral trends to test various economic outcomes and market responses
• Client conversations: Helping high-net-worth individuals understand how their portfolios may be impacted by macro trends

This framework allows us to balance caution and opportunity, working to preserve capital while staying attuned to potential growth areas.

Plan for the future by understanding the present with Avidian

Ultimately, macroeconomic forecasting is about anticipating change. While charts and models matter, they gain more power when paired with an understanding of how people react under pressure.

Whether consumers are spending freely, tightening budgets, or shifting values across generations, these choices impact everything from inflation to interest rates, and from corporate profits to government policy.

Avidian incorporates this perspective into our process, not just as a curiosity, but as a core driver of long-term, risk-aware, and opportunity-focused investment strategy. Our approach to portfolio management emphasizes clarity, discipline, and awareness, anchored in data and enriched by insight into what truly moves the market: people.

Whether you’re planning for retirement, building generational wealth, or simply wanting to choose confidence in today’s economic environment, we invite you to explore how Avidian can help by contacting one of our offices in Houston, Austin, Sugar Land, or The Woodlands.

More Helpful Articles by Avidian: 

• Why Business Owners Need Tax Contingency Plans
• What the End of Step-Up in Basis Could Mean for Your Heirs
• The Difference Between a GRAT and IDGT Trust
• The Top 10 IRA Rollover Mistakes
• Using an Intra-Family Loan for Tax-Efficient Wealth Transfer

---

Please read important disclosures here