As the holiday shopping season begins to accelerate, 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 plan to spend 4% less than last year between Black Friday and Cyber Monday, citing higher costs of living and more fear of the economy.
It’s a reversal. Previous Deloitte surveys dating back to 2021 had shown that shoppers planned to spend more than previous years during the weekend after Thanksgiving.
The pullback is expected to hit both ends of the income spectrum. Consumers earning less than $50,000 a year are expected to spend 12% less than last year, according to the business services firm. Buyers who earn more than $200,000 a year say they will reduce their expenses by 18%.
“While we expect shoppers to plan to reduce their spending, we also anticipate strong participation during the holiday week,” Natalie Martini, Deloitte vice president and U.S. retail and consumer products leader, said in a news release.
The firm surveyed 1,200 consumers across the United States between October 15 and 23.
Shoppers are flocking to malls and retail websites at a precarious time, when Americans are increasingly fearful about both the broader economy and their personal finances. Consumer confidence hit one of the lowest levels on record in November, according to the University of Michigan Consumer Confidence Survey released Friday. It is just slightly above the June 2022 low, when inflation was soaring.
Voters cited affordability as a top concern during the November election, driving Democratic victories in Virginia, New Jersey and New York City. President Donald Trump has tried to address rising food costs by removing many of the tariffs he imposed this year on food imports, including beef and coffee from Brazil.
The University of Michigan report found that consumers were particularly worried about their jobs and personal finances: 69% of respondents said they expect unemployment to rise over the next year, double what it was a year ago.
“After the federal shutdown ended, sentiment improved slightly from its mid-month reading,” wrote Joanne Hsu, director of consumer surveys at the school. “However, consumers remain frustrated by persistently high prices and weakening incomes.”
The inflation rate, which slowed earlier this year, has been rising since April, according to federal data, reaching 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 the University of Michigan consumer confidence survey expect inflation to reach 4.5% next year.
Retail earnings reports in recent weeks point to some worrying consumer trends. Walmart posted strong results last week as the discount retailer benefited from shoppers looking to save money on essentials like groceries and other essentials. The company said higher-income families are shopping more in-store in search of bargains, while lower-income families are under greater financial pressure.
“As pocketbooks have stretched, you’re seeing more consumer dollars go toward necessities rather than discretionary 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 profits, another sign that shoppers are looking for cheaper options. Target and Bath & Body Works, which are seen as stores that encourage waste, struggled during the previous quarter.
With their bank accounts already maxed out, consumers are increasingly turning to financing to be able to make their purchases. A report last month from PayPal found that half of shoppers plan to use buy now, pay later services for their holiday shopping. These services, which include apps such as Klarna, Afterpay and Affirm, allow customers to make a purchase and then pay for it in installments, typically with 0% interest.
These apps are especially popular with younger buyers. According to the Deloitte study, 39% of Generation Z and millennials will use buy now, pay later apps to spend on Black Friday. Many shoppers use these services to spread their spending over a longer period of time, but some worry that they encourage people to spend more than they can afford and could put them into debt they didn’t expect.
