As the peak holiday shopping season approaches, most U.S. consumers have a pessimistic economic outlook, according to an annual Deloitte survey released Wednesday.
Most consumers surveyed – 57% – said they expected the economy to slow in the coming year, the consultancy found in a survey of about 4,000 respondents. That compares to 30% who expected the economy to slow before last year’s holiday season and 54% in 2008, one of the years of the Great Recession.
This is the most negative economic outlook since Deloitte began tracking it in 1997.
According to Deloitte, 77% of respondents expect higher prices on holiday items, up from 69% last year. It’s the first holiday season since President Donald Trump’s latest wave of tariff hikes on many imports.
“We’ve been talking about the resilient consumer for a while now: despite all these pressures, the American consumer continues to spend and we continue to see growth and spending in retail,” said Brian McCarthy, head of retail strategy at Deloitte. “These prospects are beginning to suggest that we are nearing the end of this resilience.”
Consumers’ pessimistic mindset has factored into their spending plans during the holiday season. They plan to spend an average of $1,595, 10% less than the $1,778 they planned to spend last year, as they prepare for higher prices, according to the Deloitte survey.
The decline in anticipated spending affects all household income groups and almost all generations, Deloitte found. Yet this trend was particularly significant among younger buyers.
Gen Z consumers, aged 18 to 28 in the survey, said they plan to spend an average of 34% less this holiday season than they did a year ago. Millennials, ages 29 to 44, surveyed said they expected to spend an average of 13% less this holiday season.
This compares to Gen X, who expect to spend an average of 3% more, and Baby Boomers, who expect to spend an average of 6% less.
For Gen Z shoppers, the tighter vacation budget likely comes from feeling uncertain and unstable early in their careers, McCarthy said.
“They’re thinking about income and the job market and concerns about the economy are going to put a lot more pressure on them because they haven’t yet had time to build up their savings or plan for a less rosy economic environment,” he said.
Mike Daher, head of the U.S. consumer sector at Deloitte, said this age group is also “exposed to a lot of inflationary pressures related to housing costs,” as well as higher prices for everyday items like groceries.
For retailers and brands, the findings add a note of caution ahead of the most crucial sales period of the year. Other holiday forecasts also show that households expect to spend less during the holidays, while reflecting consumers’ appetite for decor and gifts during the holiday season.
Holiday spending in stores and online is expected to increase 4% year over year, according to consulting firm Bain & Co., down from the 10-year average of 5.2%. A separate report from Adobe Analytics finds that online vacation spending in the United States is expected to increase 5.3% year-over-year, but that would be slower than last year’s 8.7% increase.
Like Deloitte’s survey, that from consulting firm PwC indicated a holiday decline among Gen Z consumers, who said they planned to spend 23% less than last year. Overall, consumers said they expect to spend about 5% less – or an average total of $1,552 – on gifts, travel and entertainment this holiday season compared to last year’s season, according to the PwC survey.
The National Retail Federation, the industry’s leading trade group, plans to share its holiday forecast in early November.
Although holiday outlooks vary, one of the dominant themes this holiday season will be the search for value, said Deloitte’s McCarthy. Even in recent months, the company has seen a notable increase in the number of U.S. consumers who said they were looking for deals. Among income groups, the Deloitte survey indicated that seven in 10 respondents engage in three or more bargain-hunting behaviors, such as buying store brands or alternative ingredients, cooking more meals at home and buying used cars.
As consumers watch their budgets, they told Deloitte they will cut back on vacation-related extras. On average, consumers said they planned to spend 22% less on non-gifting holiday expenses, such as lodging, clothing and decor.
For gifts, however, the reduction was not as deep. On average, respondents said they planned to buy eight gifts, up from nine last year, and spend $536, up from $505 during the previous year’s holiday season.