Deloitte poll says US consumers expect higher prices and a weaker economy

As the peak holiday shopping season approaches, most American consumers have pessimistic expectations about the economy, according to an annual Deloitte survey published Wednesday.

Most consumers surveyed — 57% — said they expect the economy to weaken next year, the consulting firm found in a survey of about 4,000 respondents. That compares to 30% who expected a weaker economy before the holiday season a year ago and 54% in 2008, one of the years of the Great Recession.

This represents the most negative economic outlook since Deloitte began tracking it in 1997.

77% of people surveyed said they expect prices for holiday goods to rise, compared to 69% last year, according to Deloitte. It’s the first holiday season since President Donald Trump’s recent wave of tariff hikes on many imports.

“We’ve been talking about the resilient consumer for a while, and that despite all of these pressures, the American consumer continues to spend and we continue to see growth and retail spending,” said Brian McCarthy, head of retail strategy at Deloitte. “This view is starting to indicate that we are approaching the end of that resilience.”

Consumers’ pessimistic mindset has factored into their spending plans during the holiday season. They plan to spend an average of $1,595, 10% less than the $1,778 they planned to spend in the same period last year, as they brace for higher prices, according to a Deloitte survey.

Deloitte found that the expected spending decline covers almost all household income groups and all generations. However, it has been particularly popular among younger shoppers.

Gen Z consumers, ages 18 to 28, said they plan to spend an average of 34% less this holiday season compared to last year. Millennials, ages 29 to 44, said in the survey that they expect to spend 13% less on average this holiday season.

This compares to Generation X, who plan to spend an average of 3% more, and baby boomers, who expect to spend an average of 6% less.

For Gen Z shoppers, the tighter holiday budget likely comes from feeling uncertain and unstable early in their careers, McCarthy said.

“They are thinking income, the job market and concerns about the economy will put more pressure on them because they have not had enough time to build their savings or plan for less rosy economic environments,” he said.

The age group is also “exposed to a lot of inflationary pressures around housing costs,” along with rising prices for everyday items like groceries, said Mike Daher, U.S. consumer industry leader at Deloitte.

For retailers and brands, the results add a note of caution to the most important sales period of the year. Other holiday forecasts also found that households expect to spend less during the holidays, while still reflecting consumers’ appetite for decorating and gift-giving during the holiday season.

Holiday spending across stores and online is expected to rise 4% year over year, according to consulting firm Bain & Co, a decline from the 10-year average growth of 5.2%. A separate Adobe Analytics report found that online holiday spending in the US is expected to grow 5.3% year over year, but that will be slower than last year’s increase of 8.7% year over year.

As with the Deloitte survey, the PricewaterhouseCoopers survey noted a consumer pushback on holidays among Gen Z consumers, who said they planned to spend 23% less than during the same period last year. Overall, consumers said they expect to spend about 5% less — or an average of $1,552 — on holiday gifts, travel and entertainment compared to the previous season, according to the PwC survey.

The National Retail Federation, the major industry trade group, plans to share its holiday forecasts in early November.

Although holiday expectations may vary, one of the dominant themes this holiday season will be the search for value, Deloitte’s McCarthy said. Even in the past few months, the company has found a significant uptick in the number of American consumers reporting looking for deals. Across income groups, the Deloitte survey indicated that seven in 10 respondents engage in three or more deal-seeking behaviors, such as buying store brands or alternative ingredients, cooking more meals at home, and buying used cars.

As consumers watch their budgets, they told Deloitte they will cut back on holiday-related additions. On average, consumers said they plan to spend 22% less on non-gift holiday expenses, such as hosting, clothing and decor.

As for gifts, the cut was not deep. On average, survey respondents said they planned to buy eight gifts compared to nine in the same period last year and spend $536 compared to $505 in the previous year’s holiday season.