For the first time since 2020, U.S. consumers are planning to cut back on holiday spending, with average expenditures expected to decline 5% compared to last year, according to PwC’s 2025 Holiday Outlook Survey released Tuesday. The report, based on responses from 4,000 consumers surveyed between June 26 and July 9, highlights a growing sense of frugality—especially among Gen Z shoppers, who plan to slash their holiday budgets by 23%. 

Consumers Brace for Leaner Holidays 

The report found that 84% of consumers expect to reduce overall spending in the next six months, citing economic uncertainty, tariffs, and cost-of-living pressures. Despite the pullback, Americans are still planning to spend significantly on holiday gifts, travel, and food: 

  • Millennials lead with an average budget of $2,190.
  • Gen X follows at $1,483.
  • Gen Z expects to spend $1,357, down sharply from last year.
  • Baby boomers will spend the least, averaging $1,180.

Gen Z’s retrenchment is especially stark compared to 2024, when the age group projected a 37% increase in holiday spending.

Why Gen Z Is Pulling Back 

“Gen Z is coming of age financially. They’re taking on mortgages, raising families, and learning how to stretch their dollar,” said Ali Furman, PwC Consumer Markets Industry Leader. 

PwC’s survey also points to deeper dynamics shaping their behavior:

  • Value Obsession: “Price is Gen Z’s love language,” Furman said. Growing up in an era of rising costs, they demand transparency and prioritize affordability.
  • Trend Fluidity: Gen Z adopts and abandons trends at lightning speed, influenced by social media feeds. Retailers often struggle to keep pace.
  • Experience Seekers: They are driving in-person store traffic, but their spending lags. “They’re browsing, not buying,” Furman noted. To convert visits into sales, retailers must make stores “destinations” through limited drops, influencer collaborations, and experiential activations. 

Shifting Shopping Habits 

PwC predicts consumers will start shopping earlier, completing 80% of their purchases by Cyber Monday. Gift categories expected to perform well include: 

  • Gift cards, seen as budget-friendly and flexible.
  • Toys, apparel, and consumables.
  • Food, a resilient category offering affordability and emotional value. 

Channel parity is another key shift. This holiday season, consumers are almost evenly split: 51% plan to shop online—largely through marketplaces like Amazon, eBay, and Etsy—while 53% will shop in person.
Technology is also shaping decisions: about 15% of Gen Z and millennials say they will use AI tools to generate gift ideas. 

Retail Strategies to Combat the Spending Slowdown 

The projected pullback doesn’t spell doom for retailers—but it does mean they will need to fight harder for share of wallet. PwC’s findings, along with retail analysts’ insights, suggest several strategies: 

  • Double Down on Value Messaging: 

    • Highlight affordability, discounts, and transparency in pricing.
    • Promote bundles and “value packs” that make shoppers feel they are stretching their dollars.

  • Accelerate Trend-to-Shelf Speed: 

    • Use agile supply chains and micro-collections to match Gen Z’s fast-changing tastes.
    • Leverage social commerce platforms like TikTok and Instagram for trend discovery and immediate conversion. 
  • Enhance Experiential Retail: 
    • Transform physical stores into destinations with interactive displays, pop-up events, influencer meetups, and treasure-hunt style promotions.
    • Focus on creating social-media-friendly experiences that encourage sharing, even if purchases happen later online. 
  • Lean Into Food and Consumables: 
    • Position food-related gifts as thoughtful yet practical alternatives to big-ticket items.
    • Expand curated holiday gift baskets and gourmet consumables. 
  • Gift Card Creativity:
    • Market gift cards not as fallback options but as personalized, budget-smart gifts that still signal generosity.
    • Add value through limited-time bonuses (e.g., buy a $100 card, get $10 free).
  • Leverage AI and Personalization:
    • Use AI-driven recommendations to help shoppers discover budget-conscious but relevant products.
    • Offer personalized promotions tied to browsing history and abandoned carts. 
  • Encourage Early Shopping: 
    • Launch holiday promotions sooner to capture spend before consumer fatigue sets in.
    • Offer extended return policies and early-bird discounts to motivate advance purchases. 

While overall spending is expected to soften, PwC’s survey underscores that the 2025 holiday season will still see robust consumer activity, just with a sharper focus on value and practicality. 

“Retailers who strike the right balance between price, personalization, and experience will be best positioned to win this holiday season,” Furman concluded.

For retailers, the challenge is not only capturing spend but also adapting to Gen Z’s evolving expectations—fast fashion of ideas, value-conscious wallets, and a desire for experiences over possessions. 

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