PwC's 2025 Holiday Outlook report, released on 3/9, forecasts that Americans will spend an average of 1,552 USD on gifts, travel, and entertainment this holiday season, a 5% decrease compared to 2024. This is the most significant drop since 2020.
Alison Furman, PwC's consumer markets leader, says consumers are being forced to be more careful with their spending. "Inflation is insidious, and it's impacting their wallets," Furman said.
Los Angeles architect Kevin Ervin Kelley says his family is cutting back at every level. The 150 USD dinner dates are gone, and vacations to Hawaii or Mexico have been replaced with trips home to visit family. Despite a steady income, fluctuations in their retirement fund and concerns about rising prices have given them pause.
"This time feels different; you have to hunker down and wait it out," he said.
The Kelleys still indulge some of their daughter's requests, but recently she was denied a new backpack. "She can keep using the one from last year," he said, noting that at children's birthday parties, parents are starting to suggest "no gifts."
"Impulse buying is completely gone; we only buy what we truly need," Kelley said.
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American spending in 2025 is being tightened due to the impact of inflation. Illustrative photo: Bloomberg |
American spending in 2025 is being tightened due to the impact of inflation. Illustrative photo: Bloomberg
This trend is also evident in retail chains. At Kroger supermarkets, customers are shopping more frequently but buying less each time, while returning to using coupons and cutting back on non-essential items.
"Customers are looking for value," Kroger CEO Ron Sargent said.
Families are also choosing cheaper dining options. Budget-friendly restaurant chain Olive Garden has seen an increase in customers from households earning over 150,000 USD per year, while the higher-priced burrito chain Chipotle has experienced a decline in sales.
Gen Z (born 1997-2012) is the generation cutting back the most. Those aged 17-28 surveyed said they would reduce their budgets by 23%, more than any other generation. This is attributed to the difficult job market, increased living costs, and new financial responsibilities like buying a home and starting a family.
"This is the coming-of-age for this generation," Furman said.
Meanwhile, Millennials (1981-1996) and Gen X (1965-1980) are keeping their budgets relatively unchanged. Baby Boomers (1946-1964) are the only group expected to increase spending, by about 5%.
Anzhelika Parenchuk, 23, a graduate student at George Washington University, is turning to discount retailers like Dollar Tree for holiday gifts. After overspending last year and now without a steady income, she is being stricter with her budget. "They have the exact same things as other stores but cheaper," she said.
According to Furman, while Gen Z is tightening its budget for gifts, it is prioritizing spending on experiences like concerts and events. They are also embracing "dupe culture" (high-quality knockoffs), seeking more affordable alternatives to brand-name products.
These changes reflect a larger trend in the economy. Retailers catering to budget-conscious consumers, such as Walmart and TJ Maxx, are reporting better-than-expected sales. Conversely, companies targeting the middle-to-high income segment, like Target, are facing challenges.
According to a June survey by Empower, Americans now spend nearly four hours a day thinking about money. More than half of the 2,206 adults surveyed said they think about money more often than they did last year.
In addition, many Americans are making significant efforts to reduce spending. Chelsea Hollins, 26, canceled her food delivery service and downloaded a coupon app to compare promotions. Amanda Verdino, 39, a marketing director, reviewed her recurring subscription costs and canceled several automatic Amazon orders.
A May poll by consulting firm McKinsey found that most people plan to adjust their spending in response to tariffs. Rising prices were the top concern among those surveyed, surpassing other issues.
Kiara Carniewski, 31, who is pregnant with her second child, has cut her spending by 60-70%, from grocery bills to high-end cosmetics. "If it's not a necessity, it's not getting bought," she said.
A few weeks ago, she felt guilty about spending 5 USD on a cup of coffee. Carniewski believes the American economy has a fundamental problem: "Everything keeps getting more expensive, but wages aren't."
Minh Phuong (WSJ, CBS News)
