As the holiday shopping season begins to heat up, Americans are balancing Black Friday deals with lingering concerns about their own finances.
Consumers are looking to spend less this holiday season, new data from Deloitte shows. Shoppers surveyed said they planned to spend 4% less than last year between Black Friday and Cyber Monday, citing higher costs of living and greater fears about the economy.
This is a reversal. Previous Deloitte research in 2021 found that shoppers planned to spend more than in previous years during the weekend after Thanksgiving.
The pullback is expected to affect both ends of the income spectrum. Consumers earning less than $50,000 a year will spend 12% less than last year, according to the business services company. Shoppers earning more than $200,000 a year say they will cut their spending by 18%.
“While we expect shoppers to plan to cut spending, we also expect strong engagement during the holiday week,” Natalie Martini, Deloitte vice chair and U.S. retail and consumer products leader, said in a press release.
The firm surveyed 1,200 consumers in the United States between October 15 and October 23.
Shoppers are visiting malls and retail sites at a challenging time when Americans are increasingly wary of both the overall economy and their personal finances. In November, consumer confidence reached one of its lowest levels on record, according to the Consumer Confidence Index. University of Michigan Consumer Sentiment Survey it was released on Friday. This is only slightly above the June 2022 low, when inflation was rising.
Voters noted accessibility as a major concern during the November election, which contributed to Democratic victories in Virginia, New Jersey and New York. President Donald Trump has tried to address rising food prices by eliminating many of the tariffs he imposed this year on food imports, including beef and coffee from Brazil.
A report from the University of Michigan found that consumers are especially worried about their jobs and personal finances, with 69% of respondents saying they expect unemployment to increase in the next year, double the rate from a year ago.
“Since the end of the federal shutdown, sentiment has improved slightly compared to mid-month,” wrote Joan Xu, director of consumer surveys at the school. “However, consumers remain frustrated by continued high prices and declining incomes.”
The inflation rate, which slowed earlier this year, has been rising since April. according to federal datareaching an annual rate of 3% in September. This is taking a toll on Americans' wallets, and many don't expect relief anytime soon. Respondents to a survey of consumer sentiment conducted by the University of Michigan expect inflation to reach 4.5% by next year.
Retail earnings reports over the past few weeks have pointed to some troubling consumer trends. Walmart Posts Strong Results The discount retailer benefited last week from shoppers looking to save on essentials such as groceries and other essentials. The company said higher-income households are more likely to shop in-store for bargains, while lower-income households are under greater financial strain.
“As wallets become thinner, you see more consumer dollars going toward essentials rather than emergency items,” John David Rainey, Walmart's chief financial officer, said during the company's earnings call.
Discount fashion retailers such as Gap and TJX Cos., which owns the TJ Maxx and Marshalls chains, also reported strong quarterly earnings, another sign that shoppers are cutting prices and looking for cheaper options. Target and Bath & Body Works, which are considered stores that encourage waste, struggled in the previous quarter.
With their bank accounts already maxed out, consumers are increasingly turning to financing to afford their purchases. A last month's report from PayPal found that half of shoppers plan to use a “buy now, pay later” service for their holiday shopping. These services, which include apps such as Klarna, Afterpay and Affirm, allow customers to make a purchase and then pay it off in installments, usually with a 0% interest rate.
These apps are especially popular among younger shoppers. According to a Deloitte study, 39% of Gen Z and millennials will use buy now, pay later apps to spend money on Black Friday. Many shoppers use these services to spread their spending over a longer period of time, but some are concerned that it encourages people to spend more than they can afford and could get them into debt they didn't expect.
