This year, holiday spending in the U.S. is anticipated to drop by 5%, largely influenced by a significant 23% decrease in spending among Gen Z, as highlighted by a recent survey conducted by a prominent consulting and accounting firm. Households are planning to adopt a more mindful approach to their holiday expenditures, focusing on value and carefully evaluating where to splurge and where to cut back, according to PwC’s 2025 Holiday Outlook, released on Wednesday. This decline in expected spending reflects the growing economic uncertainty that is shaping consumer sentiment as we approach the crucial retail season.
The outlook for Gen Z this holiday season marks a notable contrast to the previous year, where their projected budgets surged by 37%. According to PwC’s analysis of credit and debit card data, actual holiday spending rose only by a modest 6%. The new survey reveals that 25% of Gen Z respondents believe their financial situation is worse than it was last year, a significant increase from the 17% who felt similarly in 2024. Factors such as rising inflation, job insecurity, and new financial responsibilities are compelling Gen Z to tighten their belts, according to Ali Furman, consumer markets industry leader at PwC.
Many young adults in this generation are experiencing pivotal life transitions amidst a challenging job market for graduates, often with limited savings. “It’s a coming-of-age story for this generation,” Furman explains, noting that many are purchasing homes and starting families for the first time, thus necessitating more careful budgeting. In contrast, Millennials and Gen Xers are maintaining their holiday budgets from last year, while Baby Boomers are the only group indicating an increase in spending, averaging a 5% rise.
Anzhelika Parenchuk, a 23-year-old doctoral student at George Washington University, exemplifies the shift towards tighter budgets. She plans to approach the holidays with a more restricted financial plan, opting for discount retailers like Dollar Tree and Five Below for gifts. “They have the same items as other retail stores, but at lower prices,” she remarks. Parenchuk learned her lesson after overspending last year and is now more vigilant with her finances, especially since she no longer has income from her previous job.
Despite tightening budgets, Gen Z continues to prioritize spending on experiences over material goods, even in the face of rising ticket prices. PwC’s Furman notes that this generation is reluctant to cut back on concerts and events, with a recent survey revealing that 86% of young adults admit to overspending on entertainment. “Those experiences are taking up a lot more of their wallet share,” Furman states, leading to less available cash for holiday shopping compared to previous years.
As a result of constant price increases, Gen Z has developed a strong inclination towards value, often embracing "dupe" culture, which involves seeking affordable alternatives to brand-name products. Even when it comes to high-status items, this generation prefers them at reasonable prices, a trend Furman describes as “affordable exclusivity.” Retailers that cater to budget-conscious consumers are thriving, with chains like Dollar General, Five Below, TJ Maxx, and Walmart reporting better-than-expected sales. Conversely, companies targeting middle to higher-income shoppers, such as Target, are facing challenges.
A recent survey by the digital coupon company RetailMeNot indicates that shoppers plan to spend less this holiday season, with average budgets down by 15%. Concerns regarding rising prices dominate respondents' minds, prompting many to consider switching brands or beginning their holiday shopping earlier if tariffs result in higher costs. “Shoppers are spending with purpose, planning ahead, and discerning which deals to pursue,” says Stephanie Carls, a retail insights expert at RetailMeNot.
As economic pressures continue to mount, consumers like Parenchuk feel the strain of rising prices. She expresses her frustration, noting that items that once cost $10 now seem closer to $20, forcing her to limit her purchases. To manage this stress, she has adopted stricter budgeting measures, advising, “Get cash, and once you’re out, you’re out. Just be more strict with myself for my own good.”
