Cash-strapped shoppers, in particular younger Americans, are expected to reel in their spending this holiday season, amid a growing set of financial headwinds and marked declines in consumer confidence.
According to a new survey by Deloitte, consumers plan to spend $1,595 on average this year, down 10 percent compared to 2024, with spending set to fall for both retail goods (by 14 percent) as well as experiences (6 percent).
While nearly every income and age bracket signaled their intention to trim the holiday budget, Deloitte found that “economic pressures appear to be pushing younger generations in particular to pull back on spending,” with spending among Gen Z shoppers expected to drop by 34 percent year-over-year.
Why It Matters
Recent forecasts concerning holiday season spending have been mixed. Some—like those from PwC—point to notable slumps especially among Gen Z, with others from MasterCard and KPMG suggesting an uptick in dollar-term spending with the caveat that much of this will be the result of inflation.
Concerns about a softer-than-usual Christmas have been fueled in part by declining consumer confidence, which, alongside tariffs, some businesses believe could weigh heavily on sales during the most crucial shopping period of the year.
What To Know
Deloitte’s survey, conducted between August 27 and September 5, found that costs are on the minds of many going into this holiday season. Of the 4,720 surveyed consumers, 56 percent said they are anxious about higher prices, rising to 62 percent among Gen Z. Meanwhile, 77 percent anticipate higher prices on holiday items specifically, compared to 69 percent in 2024.
Over half—57 percent—said they expect the economy to weaken over the next year, compared to 30 percent in 2024 and 54 percent in 2008. As Deloitte notes, this is the least optimistic outlook recorded since it began tracking consumer sentiment in 1997.
According to the University of Michigan’s latest survey of consumer sentiment, October saw a slight decline to 55 points, below the commonly viewed 60-point threshold signaling very low confidence and marking the lowest reading since May.
Joanne Hsu, who oversees the university’s monthly consumer surveys, told Newsweek that when sentiment remains at such “subdued” levels, “consumers lack the confidence to spend freely and tend to pull back their spending.”
“The 2022-2023 inflationary period was an exception, but that period was also characterized by unusually strong labor markets, meaning that consumers had the strength in incomes to support robust spending despite low sentiment,” she said. “In contrast, consumers are currently quite worried about weakening labor markets and incomes, so it seems unlikely that they will be willing to ‘spend through’ their negative sentiment in the same way.”
Consumer spending has so-far remained robust in 2025—contributing to strong GDP growth in the second quarter—and some believe retailers might be spared any negative knock-on effects of this downward trend in confidence.
“Consumer confidence is not an entirely accurate indicator of what people spend,” Neil Saunders, managing director of GlobalData Retail, told Newsweek. “Obviously, having more confident consumers is helpful, but even with very changeable confidence over the past 12 months, consumers have still been spending and there has been solid growth in retail sales.
“The same applies to the holiday season, even if confidence is more muted, people still want to enjoy themselves and will splash out somewhat,” he said.
“While consumer confidence is a bit softer, the resilience of the consumer is still there,” said Marshal Cohen, chief retail advisor at Circana. However, he told Newsweek that if economic conditions “remain on the path they are,” post-holiday spending could be significantly impacted.
What People Are Saying
Sucharita Kodali, a retail industry analyst at Forrester, told Newsweek: “inflation is better than it was in the recent past, but consumers still worry that prices on key items they care about like food and essentials will still be too high so they’ll likely look for deals.
“I don’t hear as much news about tariffs or concern about tariffs from consumers,” she added. “Businesses seem to want to use tariffs as an excuse when their sales are down but there is still so much that is in flux, it is hard to tell what consumers are actually facing and what will affect their holiday purchases.”
What Happens Next
Despite forecasts such as Deloitte’s and no signs of an imminent recovery in consumer confidence, many retailers appear optimistic about the upcoming holiday season and have already begun rolling out discounts to entice shoppers.
Walmart’s CEO told analysts in August that a strong back-to-school shopping period had given the company confidence entering the holiday stretch, and Macy’s has similarly upgraded full-year forecasts despite the challenges of what executives dubbed the “more choiceful consumer.”
Analysts believe the outcome of this year’s holiday shopping period—whether spending surpasses or falls short of previous years—could serve as an indicator of which direction the economy is taking.
“A poor holiday season will be a clear sign that consumer resilience is cracking and it will ensure 2026 starts on a gloomy note,” Saunders told Newsweek. “That said, most retailers are expecting a reasonable festive trading period. The big theme will be polarization between winners and losers.”
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