U.S. Consumers Brace for Holiday Season Amid Economic Concerns
As the holiday shopping season approaches, a recent survey by Deloitte reveals a significant shift in consumer sentiment, with many Americans expressing a pessimistic outlook on the economy. This annual survey, which polled approximately 4,000 respondents, indicates that 57% of consumers anticipate a weakening economy in the coming year. This figure marks a stark increase from 30% last year and is reminiscent of sentiments during the Great Recession in 2008, when 54% of consumers shared similar concerns.
Historical Context of Consumer Sentiment
Deloitte’s findings represent the most negative economic outlook recorded since the firm began tracking consumer sentiment in 1997. The current climate reflects a broader trend of economic uncertainty that has been exacerbated by various factors, including inflation, rising interest rates, and geopolitical tensions. Historically, consumer confidence has been a reliable indicator of economic health, and the current pessimism could have significant implications for retail performance during the crucial holiday season.
Rising Prices and Consumer Spending
The survey also highlights that 77% of respondents expect higher prices on holiday items, a notable increase from 69% last year. This year marks the first holiday season following a series of tariff hikes implemented during the Trump administration, which have contributed to rising costs for many consumer goods. Brian McCarthy, Deloitte’s retail strategy leader, noted that while consumers have shown resilience in spending despite economic pressures, this latest outlook suggests a potential shift towards more cautious spending behaviors.
In light of these economic concerns, consumers plan to spend an average of $1,595 this holiday season, which is a 10% decrease from the $1,778 they intended to spend last year. This decline in anticipated spending spans across all income groups and generations, but it is particularly pronounced among younger shoppers.
Generational Spending Trends
The survey reveals that Gen Z consumers, aged 18 to 28, plan to spend an average of 34% less this holiday season compared to the previous year. Millennials, aged 29 to 44, also expect to reduce their spending by 13%. In contrast, Gen X consumers plan to increase their spending by 3%, while Baby Boomers anticipate a 6% decrease.
The financial constraints faced by younger generations can be attributed to their early career stages, where job market uncertainties and inflationary pressures-particularly in housing and everyday expenses-are more pronounced. Mike Daher, U.S. consumer industry leader for Deloitte, emphasized that these economic pressures weigh heavily on younger consumers, who may not yet have the financial stability to weather economic downturns.
Retailers’ Cautious Outlook
For retailers, these findings serve as a cautionary signal as they prepare for the most critical sales period of the year. Other forecasts also indicate a trend of reduced holiday spending. According to Bain & Company, holiday spending across both physical and online stores is expected to rise by only 4% year-over-year, a decline from the 10-year average growth rate of 5.2%. Similarly, Adobe Analytics projects a 5.3% increase in online holiday spending, down from an 8.7% increase last year.
The PwC survey corroborates these findings, revealing that Gen Z consumers plan to spend 23% less than they did in the previous year. Overall, consumers expect to spend about 5% less-averaging $1,552-on gifts, travel, and entertainment compared to last holiday season.
The Value-Seeking Trend
One of the most significant themes emerging from this year’s holiday outlook is the increasing focus on value-seeking behaviors among consumers. Deloitte’s survey indicates that seven in ten respondents are engaging in multiple deal-seeking strategies, such as opting for store brands, cooking more meals at home, and purchasing used items. This shift reflects a broader trend of frugality that has taken hold as consumers navigate economic uncertainties.
As consumers tighten their budgets, they are also planning to cut back on non-gift holiday expenses. On average, respondents indicated they would spend 22% less on holiday-related extras, including hosting, clothing, and decorations. However, spending on gifts remains relatively stable, with consumers planning to buy an average of eight gifts-down from nine last year-and spend approximately $536, compared to $505 in the previous holiday season.
Conclusion
As the holiday season approaches, the findings from Deloitte’s survey paint a complex picture of consumer sentiment in the United States. With a significant portion of the population bracing for economic challenges and rising prices, retailers may need to adapt their strategies to meet the evolving needs of consumers. The emphasis on value-seeking behaviors and cautious spending could redefine the holiday shopping landscape, making it essential for brands to offer compelling deals and experiences that resonate with a more budget-conscious consumer base. As the National Retail Federation prepares to release its holiday forecast in early November, all eyes will be on how these trends unfold in the coming weeks.
