Gen Z Leads Holiday Spending Pullback Amid Economic Uncertainty

U.S. consumers are preparing for a significant reduction in holiday spending this year, with an overall expected decline of 5% compared to last year. This downturn is largely driven by Generation Z, who plan to cut their holiday budgets by 23%, a stark contrast to their 37% increase in spending projected for 2024. According to PwC’s 2025 Holiday Outlook, this marks the first notable decline in holiday spending since 2020.

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The economic landscape, characterized by inflation, job insecurity, and the lingering effects of tariffs from the Trump administration, has prompted consumers to adopt a more cautious approach to holiday shopping. Over 80% of surveyed consumers indicated they plan to reduce their spending over the next six months, with rising prices being a primary concern. More than half of respondents expect price increases to influence their holiday purchasing decisions.

U.S. Holiday Spending Set for Steepest Drop Since Pandemic, PwC Survey Shows

Gen Z's financial outlook has shifted dramatically, with 25% of respondents in this age group reporting that their financial situation is worse than the previous year. This generation is increasingly focused on value, often opting for discount retailers such as Dollar Tree and Five Below for gifts. Ali Furman, PwC’s consumer markets industry leader, noted that Gen Z is prioritizing experiences over material gifts, leading to a significant pullback in holiday spending.

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Retailers are facing challenges in adapting to Gen Z's rapidly changing preferences. Furman emphasized that many retailers fail to respond quickly to emerging trends that resonate with younger consumers. Gen Z's shopping behaviors are influenced by social media, with many using these platforms for gift discovery. However, the lack of brand loyalty among this demographic complicates retailers' efforts to capture their attention.

PwC: Gen Z Plans to Spend 23 Percent Less On Holiday Purchases

In light of economic pressures, gift cards are becoming a popular choice for holiday gifting. More than half of consumers plan to give gift cards, viewing them as a way to maintain generosity without overspending on physical gifts. This trend reflects a broader strategy to manage budgets while still participating in holiday traditions.

PwC: Gen Z Plans to Spend 23 Percent Less On Holiday Purchases

Critics argue that retailers need to do more to engage with Gen Z consumers effectively. The current economic climate has led to a perception that retailers are not meeting the needs and expectations of younger shoppers. This disconnect could further exacerbate the challenges retailers face in attracting Gen Z's discretionary spending.

PwC: Gen Z Plans to Spend 23 Percent Less On Holiday Purchases

• “What we’re seeing with Gen Z is a coming of age generation,” — Ali Furman, PwC Consumer Market Industry Leader

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• “Price is Gen Z’s love language. This is the generation that’s been raised in an era of rising cost, so they are laser-focused on value and cost transparency, more than any other generation,” — Ali Furman, PwC Consumer Market Industry Leader

Forbes

• “Consumers are approaching holiday purchases more deliberately, deciding what matters most, where to scale back and what feels worth the splurge,” — PwC Report

U.S. Holiday Spending Set for Steepest Drop Since Pandemic, PwC Survey Shows

As the holiday season approaches, the combination of economic uncertainty and shifting consumer priorities suggests that retailers will need to adapt their strategies to capture the attention of a more frugal and discerning Gen Z. The anticipated decline in spending, particularly among younger consumers, underscores the need for retailers to innovate and respond to the evolving landscape of consumer expectations.

PwC: Gen Z Plans to Spend 23 Percent Less On Holiday Purchases