The Supply Side: Survey suggests consumers likely to overspend this holiday season

Even with sustained inflation, tariff impacts on prices for imported goods, and a softening job market, consumers are still likely to spend more than they budget this holiday season, according to a report from PricewaterhouseCoopers (PwC).

The report conducted in late October projected the consumer budget for holiday gifts had risen from $721 in June to more than $770 ahead of the Black Friday sales. That’s a 7% increase in spending.

“When it comes to the holidays, people are willing to stretch their budgets, even if it means they have to cut back in January,” the report noted. “Consumer sentiment is evolving, and so are the trade-offs people are willing to make.”

While some age groups are likely to spend more, others are more likely to pull back. Looking at the specific consumer generations, PwC found that millennials (ages 29 to 44) are expected to spend $843, which is down from $921 in June when they were last surveyed. Generation X consumers (ages 45 to 60) are also reducing their holiday budget to $679 from $705 they had estimated in June.

Analysts at PwC said this was likely related to parents balancing holiday priorities with rising costs.

The other two generation cohorts have increased their spending plans for this holiday season since they were last surveyed in June. Baby boomers (ages 61 to 79) are now planning to spend $858, up from $671 in June. Generation Z adult consumers (ages 18 to 28) have raised their holiday spending budget since June. They plan to spend an average of $622, up from $586.

“For Gen Z, this increase may reflect higher prices,” the report noted. “For older generations, it may signal more financial stability and a willingness to splurge on children and grandchildren.”

Looking at the broader economy, PwC said discretionary spending seems to be stabilizing and is increasing heading into the holidays. PwC’s analysis shows a 3.2% year-over-year increase in fourth quarter spending, driven by stronger combined spending since October. Average expected spend for the quarter is projected to rise from $7,591 to $7,834.

The report said consumers had planned to hold back, but their actual behavior since the Holiday Outlook survey and through the Thanksgiving week promotions suggests otherwise.

“American consumers may be cautious in sentiment, yet remain fundamentally strong and continue to drive U.S. economic activity,” said Matthew Shay, CEO of the National Retail Federation (NRF).

With record online sales reported from Thanksgiving through Cyber Monday, holiday sales totaled an estimated $68.5 billion for the five days, up 7% from $62 billion a year ago, according to the NRF. The average spend for the five days totaled $337.86, a substantial percentage of consumers’ total budgets. Consumers surveyed by NRF said they had more than half of their shopping still to do.

Consumers are showing up for big promotions, as noted with strong sales on Black Friday and Cyber Monday when retailers pushed their deepest discounts. PwC reports that consumers it surveyed plan to stick with familiar gifts, with half planning to purchase gift cards, 39% eyeing apparel, 37% shopping for toys, 34% planning to buy food and consumables for gifts, and 30% expect to purchase books, music or movies as gifts.

While experiences as gifts are still popular with consumers, PwC notes that gifts including travel and entertainment are often self-gifted. Survey data found consumers are price-sensitive, and they are seeking value and gifts that they can purchase conveniently.

Despite the rise in deferred payment options and use among consumers, PwC said cash is making a comeback. Survey data indicated that half of respondents planned to use cash this holiday season for some of the gifts and purchases. PwC said the older generations of boomers and Gen X tend to use credit cards, while Gen Z heavily favors debit cards and mobile payments. Digital wallets and PayPal are also gaining traction across all generations.

PayPal’s 2025 Holiday Shopping Survey found more than half of consumers plan to use deferred payment options like PayPal, Affirm or Klarna to cover some of their holiday spending expenses. Data shows that 52% of consumers said they are more likely to make a purchase when buy now, pay later (BNPL) options are available at checkout.

One-quarter of Gen Z and millennial shoppers use BNPL services regularly, and a third have paid for a purchase using the service at least once, per the survey results.

“When shoppers know they can pay over time, they’re more likely to complete their purchase,” Michelle Gill, general manager of small business and financial services at PayPal, noted in the report. “PayPal data shows offering BNPL leads to a 91% higher average order value for enterprises and 62% higher for small businesses, meaning it isn’t just a nice-to-have, it’s a proven advantage to win.”

Economists at Bank of America warn that too much reliance on BNPL to fund holiday giving will also mean much less spending in the coming months when consumers are paying off the loans. They reference a YouGov survey that found almost 25% said they often exceed their budget when using BNPL, and 16% admit they missed a bill payment after using BNPL to make a purchase.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by HRG.