As the holiday shopping season nears, American consumers are tightening their belts. A new Deloitte survey reveals that 57% of U.S. consumers expect the economy to weaken in the next year, the most pessimistic outlook recorded since the firm began tracking sentiment in 1997.

This sharp decline in confidence comes as inflation continues to squeeze household budgets and tariffs push prices higher across a range of imported goods. The outlook signals a significant shift in consumer behavior after years of resilient spending that helped sustain economic growth.

Consumers Expect Higher Prices — and Are Preparing to Spend Less

According to Deloitte’s findings, 77% of Americans expect higher holiday prices this year, compared to 69% in 2024. As a result, the average consumer plans to cut holiday spending by 10%, from $1,778 last year to $1,595 in 2025.

This cautious approach spans all income levels but is most pronounced among younger generations. Gen Z shoppers (ages 18–28) plan to reduce their spending by a staggering 34%, while Millennials (ages 29–44) expect to spend 13% less. Gen X consumers anticipate a slight 3% increase, whereas Baby Boomers plan to cut back by 6%.

Deloitte’s Brian McCarthy, Retail Strategy Leader, noted that while American consumers have shown remarkable resilience over the past two years, “this outlook suggests we may be nearing the end of that resilience.”

Why Younger Consumers Feel the Pinch

The steepest spending cuts are coming from younger generations, who face multiple economic headwinds. Many Gen Z consumers are early in their careers, earning modest incomes while dealing with rising rent, student loan repayments, and inflation-driven living costs.

“They’re entering adulthood in a challenging economy, without significant savings or financial buffers,” said McCarthy. “Concerns about job stability and income growth are weighing heavily on their spending confidence.”

Mike Daher, U.S. Consumer Industry Leader at Deloitte, added that younger adults are also “disproportionately exposed to inflationary pressures,” especially around housing, transportation, and groceries.

Retailers Face a Value-Driven Holiday Season

For retailers and brands, these findings serve as a warning. While Americans are still planning to celebrate and exchange gifts, the focus has shifted sharply toward value. According to Deloitte, seven in ten consumers are now engaging in at least three deal-seeking behaviors, including:

• Buying store brands instead of name brands
• Cooking at home rather than dining out
• Purchasing used or refurbished items instead of new ones

Consumers also plan to spend 22% less on non-gift holiday categories such as home décor, holiday clothing, and hosting expenses. Gift-giving remains relatively resilient, though slightly reduced: people expect to purchase eight gifts this year, down from nine in 2024, spending an average of $536 on presents compared to $505 last year.

A Slower Holiday Spending Growth Nationwide

Deloitte’s findings align with other research showing a more cautious consumer landscape. Bain & Company projects overall holiday retail sales — across both physical stores and e-commerce — will grow around 4% year-over-year, down from the 10-year average of 5.2%.

Meanwhile, Adobe Analytics forecasts a 5.3% increase in online sales, slower than last year’s 8.7% rise, indicating that digital retail growth is also moderating.

A separate PwC survey similarly found that Gen Z consumers expect to spend 23% less than last year, while overall holiday spending is predicted to fall by 5%, averaging $1,552 per household across gifts, travel, and entertainment.

The National Retail Federation (NRF) is expected to release its official 2025 holiday spending forecast in early November, but industry experts anticipate another moderate growth year, reflecting careful budgeting by consumers.

Inflation, Tariffs, and Economic Fatigue

Several factors are fueling the subdued sentiment. Persistent inflation, now hovering near 3.4% year-over-year, continues to affect everyday expenses from groceries to fuel. Additionally, new U.S. tariff hikes on imports from China — including consumer electronics, toys, and apparel — are beginning to ripple through retail prices just as holiday shopping ramps up.

Economists also point to a broader economic fatigue among households. After years of high borrowing costs and elevated living expenses, many Americans are prioritizing savings and debt repayment over discretionary purchases.

The Big Picture: Value and Practicality Dominate 2025 Holidays

Despite tighter budgets, Americans aren’t canceling their celebrations — they’re simply spending smarter. Retailers can expect an extended shopping season, with early bargain-hunting dominating the landscape. Black Friday and Cyber Monday deals are likely to draw heavier participation, while discount retailers, dollar stores, and online marketplaces are poised to benefit most.

The holiday season of 2025 may not deliver record-breaking sales, but it reflects a new economic reality: American consumers are increasingly pragmatic, cautious, and price-conscious — a trend that could redefine retail strategies well into 2026.

As McCarthy concluded, “The U.S. consumer has long been the backbone of the global economy. But this year’s data suggests they’re finally starting to feel the weight of prolonged financial pressure.”