American shoppers are increasingly pessimistic about the economy — and their holiday spending is going to reflect that.
Newsweek reports that unease about inflated prices and broader financial anxieties will see many Americans hunting for deals this holiday season (1).
A survey by PayPal, the news outlet reports, found that 77% of shoppers who have used artificial intelligence previously for finding deals, comparing products and generating gift ideas are intending to use it for their holiday shopping this year (2). In addition, half of respondents said they are planning to rely on buy now, pay later (BNPL) loans to finance their holiday purchases.
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Overall, the holiday outlook is somewhat gloomy. Newsweek notes that while some forecasts are predicting decreased spending this holiday season, others anticipate that spending will be higher — but as a result of increased prices, not because consumers are looking to buy more this season. The National Retail Federation’s annual holiday survey shows that Americans plan to spend an average of $890.49 per person on holiday items this year, just below last year’s record high of $901.99 (3).
So what should consumers expect at the checkout? Here’s the breakdown, and budgeting tips to help you focus on staying in the green, rather than the red, this holiday season.
Rising costs … or not?
The National Retail Federation’s survey found that 85% of respondents were expecting higher prices due to tariffs, and 63% plan to postpone their holiday shopping until the discount-filled Thanksgiving weekend.
In spite of Americans’ concerns, President Donald Trump asserts that prices are falling, posting on Truth Social (4):
“JUST OUT: Good news for the Holiday Season. EARLY PRICES ARE DOWN, WHILE TARIFFS ARE MAKING OUR COUNTRY AN ECONOMIC POWER AGAIN. Also, virtually NO INFLATION, AS STOCK MARKETS CONTINUALLY HIT RECORD HIGHS. THE BEST OF ALL WORLDS FOR THE U.S.A.”
However, a recent consumer pulse survey from KPMG found that 8 in 10 shoppers are expecting tariffs to drive up prices this holiday season (5).
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How consumers are spending now
Current consumer behavior may be an indicator of how shoppers will actually spend in December.
The cost of living has become the top concern for Americans according to a survey by Statista Consumer Insights (6). Almost half (49.1%) of Americans say the cost of living is their biggest challenge in 2025, nearly double that of the next highest categories, physical (26.3%) and mental (26%) health.
Additionally, food prices continued to tick upwards in the past few months, with the average grocery prices rising 0.3% between August to September, according to the latest Consumer Price Index figures. Year over year, prices were about 2.7% higher. And data from the Bureau of Labor Statistics shows that while the consumer price index has increased by 22.7% since January 2021, real wages have decreased by 0.7% during that time.
Furthermore, confidence in the so-called American Dream seems to be fading. LendingTree finds that only 38% of Americans who don’t currently consider themselves wealthy believe they will be wealthy in the future (7). This figure has been trending downwards each year the study has been conducted since 2019, reports Newsweek (8). That year, 51% of Americans believed they would be wealthy in the future.
"Life’s really expensive in 2025, and budgets are really tight for so many American households. That means less money to put toward wealth-building moves such as buying a home, investing in the stock market or starting a small business,” Matt Schulz, LendingTree’s chief consumer finance analyst, told the news outlet.
“People want to focus on building their future but instead feel like they’re treading water today, and that can be incredibly discouraging.”
How to budget for extra holiday expenses
If you’re one of the Americans treading water this holiday season, it can be hard to get into the spirit of giving without anxiety over the cost. Here are ways to help you balance spending and saving:
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Review 2024 spending. Base your holiday spending budget on last year, and be sure to look for unexpected expenses you incurred. Getting a clear picture of how you spent last year can help you set expectations for this year.
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Set a budget. Make a list, and check it twice. Set spending limits for each of the people on your list, and think of creative ways you can fulfill your obligations. Homemade gifts can be just as delightful as store-bought ones, if you’re able to spend time rather than money this holiday season.
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Invest time. While you may not have the hours needed for making presents, you should spend a little time shopping around for the best prices. Comparison shop online, check social media for sales and discount codes — AI and shopping apps can help. And decide on what you’ll buy before you hit the stores — this can help curb impulse spending that can blow your budget.
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Track your spending. It’s no good to set a budget if you forget about it when you get to the mall. Track your purchases in a budgeting app or even a notebook, and use your list to help you stay on track with your spending.
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Plan for 2026. One way to make holiday shopping less stressful next year is to look out for deals on gifts, gift wrap and other seasonal items in January. This can help cut down your holiday spending for next year.
You can also start setting aside a small amount in your savings each month moving forward to help pad your budget for the following year.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Newsweek (1), (8); PayPal (2); National Retail Federation (3); @realDonaldTrump, Truth Social (4); KPMG (5); Statista (6); LendingTree (7)
This article originally appeared on Moneywise.com under the title: An unexpected tool is being used to fight inflation by millions of Americans. What you can do this holiday season
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.