As the holiday season approaches, a surprising number of Americans are planning to cut back on spending, revealing a fascinating blend of confidence and caution in the face of economic uncertainty.
Story Overview
- 42% of Americans plan to reduce holiday spending compared to last year.
- 20% of those scaling back are skipping gifts entirely.
- Despite cutbacks, holiday sales are expected to surpass $1 trillion.
- Income disparities influence spending behaviors significantly.
Holiday Spending Trends in 2025
The 2025 holiday season presents a unique dichotomy where many Americans feel financially secure, yet a significant portion are planning to reduce their holiday expenditures. According to a survey conducted by Nationwide, 42% of participants intend to scale back on holiday spending this year. This trend reflects a broader sentiment of caution despite economic indicators like low unemployment and stable inflation.
Among those opting for frugality, 49% are focusing on buying fewer gifts, 38% are choosing cheaper options, and a notable 20% are skipping gifts altogether. This shift in consumer behavior stands out against previous years where holiday spending forecasts primarily focused on aggregate sales projections without delving into the nuanced behavior of consumers. The decision to cut back, even in the face of personal financial stability, suggests a proactive approach to anticipated economic pressures.
Economic Context and Consumer Sentiment
The backdrop to these spending decisions involves a complex economic landscape. Historically, US holiday spending trends have mirrored the broader economic cycles, with the post-2023 recovery seeing a 4.3% growth in holiday sales in 2024. However, persistent inflation concerns have lingered into 2025, creating an environment where consumers are increasingly cautious.
Surveys from organizations like PwC and YouGov have captured this shifting sentiment. While PwC noted a “say-do gap,” where consumers planned restraint but actual spending increased by 3.2% year-over-year in Q4, YouGov highlighted that 36% of respondents are cutting back on food and drink expenses. This divergence between intentions and actual behavior underscores the complexity of the current economic climate.
Income Disparities and Spending Behavior
Income disparities play a significant role in shaping holiday spending behaviors. While high-income individuals are more likely to maintain or increase their spending, lower-income groups are driving the cutbacks in discretionary spending. This is evident in the targeted reductions in apparel, electronics, and non-essential items, while essentials like food and drink remain prioritized but within stricter budgets.
For lower-income households, the pressure to manage holiday expenses is particularly acute, with many opting for more budget-friendly alternatives. This trend is consistent with historical patterns where economic pressures disproportionately impact those with less financial flexibility. The emphasis on value and essential spending is further highlighted by the increased preference for gift cards and food items as practical gift options.
Implications and Future Outlook
In the short term, selective spending is likely to boost the sales of essential items while pressuring non-essential categories. Despite the conservative spending intentions, forecasts from the National Retail Federation (NRF) suggest that holiday sales are still expected to surpass $1 trillion, driven largely by high-income and Gen Z consumers who are more inclined to splurge.
In the long term, the persistent trend of income disparities could widen if lower-income households continue to face financial constraints. This could potentially slow the recovery of discretionary spending in future holiday seasons. Retailers and consumer packaged goods companies may need to adapt their strategies to cater to a more value-conscious consumer base, especially as economic conditions continue to evolve.
Sources:
McKinsey on The State of the US Consumer
YouGov Holiday Spending Report
Nationwide News on Holiday Spending
