Holiday Spending to Drop 5.3% as Consumers Tighten Belts

American consumers are expected to scale back their holiday spending this year, with Generation Z leading the way in reducing their expenditures. A recent survey by PwC indicates that the upcoming holiday season may see the largest decline in consumer spending since the onset of the pandemic. The survey, conducted between June and July, involved approximately 4,000 American consumers and revealed that the average planned spending per person is around 1,552 dollars, marking a 5.3% decrease from the previous year. The last time a similar decline was observed was in 2020, when spending dropped by 7.6% to 1,187 dollars per person.

The survey also found that about 84% of consumers plan to cut back on their spending over the next six months, particularly in areas such as clothing, large-ticket items, and dining out. More than half of the respondents indicated that price increases could influence their holiday spending decisions. The economic uncertainty, exacerbated by inflation and trade policies, has made consumers more cautious about non-essential spending. This trend poses a challenge for major retailers as they enter the critical holiday season.

The survey highlights that gift spending is expected to be the most affected category, with an anticipated 11% decrease in average spending from 814 dollars last year to 721 dollars this year. Generation Z, in particular, is projected to reduce their holiday budgets by 23%, a stark contrast to the 37% increase observed in 2024. This demographic, known for their preference for in-store experiences, is likely to continue visiting physical stores but may not necessarily complete their purchases there. The actual purchasing behavior, however, remains subject to change, and the survey notes that the uncertainty surrounding tariff policies has somewhat eased since July.

Consumers are adopting a more prudent approach to holiday planning, focusing on essential spending and identifying areas where they can cut back. This shift in consumer behavior is driven by economic pressures and changing preferences, particularly among the younger generation. Retailers will need to adapt their strategies to cater to these evolving consumer habits, which may include offering more affordable products, enhancing digital shopping experiences, and providing greater transparency in pricing and value. The survey underscores the need for businesses to stay attuned to these changes to maintain their competitiveness and appeal to the evolving needs of their customer base.