A recent survey has revealed a concerning trend among U.S. consumers as we approach the peak holiday shopping season. The majority of Americans are bracing for higher prices and a weaker economy, a stark contrast to the resilience we've seen in recent years. This pessimistic outlook is a cause for concern, especially as it translates into reduced spending plans for the holidays.
The Economy's Downbeat Outlook
The annual Deloitte survey, published on Wednesday, paints a gloomy picture of the U.S. economy. A staggering 57% of consumers surveyed expect the economy to weaken in the coming year, a significant increase from the 30% who held this view a year ago. This is the most negative economic outlook since Deloitte began tracking this data in 1997.
Impact on Holiday Spending
Consumers' concerns about the economy and rising prices are directly impacting their holiday spending plans. On average, they plan to spend $1,595 this holiday season, a 10% decrease from the previous year's planned spending of $1,778. This reduction in spending is consistent across all income groups and generations, but it's particularly notable among younger shoppers.
Gen Z consumers, aged 18 to 28, plan to spend an average of 34% less this holiday season compared to last year. Millennials, aged 29 to 44, also expect to cut back, with a 13% decrease in spending. In contrast, Gen X plans to increase spending by 3%, while Baby Boomers expect a more modest 6% decrease.
The Impact on Retailers and Brands
These findings are a cautionary tale for retailers and brands during the most crucial sales period of the year. Other holiday forecasts also predict reduced spending, indicating that consumers are tightening their budgets. According to consulting firm Bain & Co., holiday spending is expected to rise by only 4% year over year, a significant drop from the 10-year average of 5.2% growth. Adobe Analytics predicts a slightly higher growth of 5.3% for online holiday spending in the U.S., but this is still slower than the 8.7% increase seen last year.
Value-Seeking and Deal-Hunting
Despite the overall decrease in spending, consumers are still eager to participate in the festive season, with a focus on value and deals. Deloitte's Brian McCarthy highlights value-seeking as a dominant theme this holiday season. The firm has noticed a notable increase in U.S. consumers actively seeking deals, with seven out of ten respondents across income groups engaging in three or more deal-seeking behaviors.
Cutting Back on Extras
As consumers watch their budgets, they plan to cut back on holiday-related expenses beyond gifts. On average, they intend to reduce spending on non-gift holiday expenses, such as hosting, clothing, and decor, by 22%. However, when it comes to gifts, the cut is less severe, with respondents planning to buy eight gifts on average, compared to nine last year, and spending $536, up from $505 in the previous holiday season.
A Controversial Interpretation
While the survey results paint a challenging picture for retailers and brands, it's important to note that consumers' desire to participate in the holiday season remains strong. The focus on value and deals suggests that retailers who can offer attractive promotions and discounts may still see robust sales. This interpretation invites discussion: Will the value-seeking trend benefit certain retailers and brands more than others? How can retailers adapt their strategies to cater to this changing consumer behavior?
What are your thoughts on this holiday season's economic outlook and its impact on consumer spending? Feel free to share your insights and predictions in the comments below!
