Holiday cheer may be in short supply this year — at least at the cash register.
The holiday season is usually a reliable boost for retailers and a stretch for consumers. But as employment worries mount and with spending projected to plunge at the steepest pace since 2020, retailers are bracing for leaner times, and families are rethinking what they can realistically afford.
A new PwC survey [2] says U.S. holiday spending is projected to drop 11% from last year, which would be the sharpest decline since the depths of the pandemic. The reason isn’t that Americans suddenly dislike gift-giving. Instead, it’s a toxic mix of lingering inflation, tariff uncertainty and household debt stress that’s weighing on wallets [3].
And one group is expected to cut back the hardest: Gen Z shoppers, ages 17-28, many of whom are facing student loan repayments and high rent costs at the same time. PwC says Gen Z respondents expect their holiday budgets to drop by 23%, the biggest among the generations surveyed. Their pullback could set the tone for the season, putting extra pressure on retailers already bracing for a slowdown.
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Retailers brace for a frostier season
Gen Z may be leading the retreat, but they’re not alone. Retailers of all sizes are preparing for a frostier season.
“The traffic for Gen Z in stores has been going up, because they want that experience, but they’re not necessarily transacting in-store,” said Kelly Pedersen, a partner at PwC. Browsing in stores but holding back on purchases is a behavior that underscores why retailers are nervous.
Big-box giants and e-commerce players are preparing for a more frugal season. Last year’s holiday shopping brought in more than $994 billion in sales, according to the National Retail Federation [4], cushioning retailers even as inflation ate into margins. But this year, forecasts look grimmer.
Companies like Target and Best Buy have already warned of flat or declining sales [5]. Walmart has flagged cautious consumer spending [6], particularly on discretionary items like toys and electronics. Even Amazon, which typically thrives during periods of deal-hunting, is under pressure from tariffs that could push prices higher on imported goods [7].
“Consumers are approaching holiday purchases more deliberately,” PwC noted in its report, “deciding what matters most, where to scale back and what feels worth the splurge. … People are going to keep shopping, but with continuing concerns about tariffs and elevated prices (especially on electronics, apparel, toys, food, and household staples), value-conscious choices are likely to define the season.”
If 2024 was the year of “trading down” — choosing cheaper brands and smaller gifts — 2025 may be the year of cutting out entirely. That shift could ripple through the economy: weaker holiday sales often signal slower growth ahead, especially for retailers that rely on the season for as much as 30% of their annual revenue.
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How to shop smarter without busting your budget
For families determined to celebrate without sinking into debt, this year will require extra discipline. The good news? Savvy shoppers still have options.
Start by setting a firm holiday budget and sticking to it. Experts recommend earmarking no more than what you can pay off in full by January to avoid credit card interest. Track purchases in real time with a budgeting app to prevent surprises.
Next, make tariffs and inflation work in your favor by shopping early. Retailers often roll out discounts ahead of expected price hikes. Compare prices across multiple sites, as browser extensions can automatically flag coupon codes and cheaper sellers. Don’t overlook refurbished electronics or outlet websites, which often offer steep discounts on big-ticket items.
Another underrated tactic is to swap expensive gifts for experience-based presents. A family outing or subscription service can cost less and feel more memorable than pricey electronics. And if you do plan to travel, lock in flights and hotels sooner rather than later: Prices tend to rise sharply as the holidays approach.
Younger shoppers are also leaning more heavily on digital tools. PwC found Gen Z is more likely than older generations to rely on coupon extensions, social media deals and resale marketplaces like Depop or Poshmark to stretch their budgets.
Finally, remember that expectations matter. PwC’s analysis suggested families are pondering right-sized holidays this year, focusing on smaller gatherings, fewer but more meaningful gifts, and quality time over extravagance. That doesn’t have to feel like a downgrade; it can feel like a reset.
If you’re feeling the pinch, you’re not alone. The key is to shop deliberately, plan ahead, and resist the urge to finance the holidays on credit cards. A leaner season now could mean starting 2026 with a stronger financial foundation, and maybe even a few new habits that last beyond the holidays.
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[1]. Think.ing. "US job worries intensify calls for immediate Fed rate cuts"
[2]. PWC. "A seasonal remix: Value, meaning and generational shifts"
[3]. Federal Reserve Bank of New York. "HOUSEHOLD DEBT AND CREDIT REPORT (Q2 2025)"
[4]. National Retail Federation. "NRF Says Holiday Season Was a Notable Success as ‘Consumers Came Out to Spend’"
[5]. CBS News. "Target sales fall sharply in 1st quarter and retailer warns they will slip for all of 2025"
[6]. Reuters. "Walmart forecast disappoints, shares fall on consumer spending worries"
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