PwC’s annual Holiday Outlook report, now in its 10th iteration, shows an expected 7 percent increase in sales over last year — and a 15 percent increase from 2022. But there’s more to the numbers that meet the eye.
“While this average suggests higher overall spending, individual behavior across income levels reveals a more nuanced story,” PwC researchers said in the report. “While some consumers are spending more and others are cutting back, the numbers reflect both varied spending habits and the influence of inflation, which has driven up costs across the board.”
Leading the charge on spending are Millennials with Gen Z close behind. Millennials and Gen Z have seen their holiday budgets grow by 59 percent over the past two years. Millennials are expected to spend 22 percent more this season than in 2023. This compares to a 9 percent reduction in holiday spending for Gen X and a 6 percent decline for Baby Boomers.
When asked about how much of the estimated gain is due to inflation, Kelly Pedersen, retail leader for PwC U.S., told WWD that “inflation is definitely a component but not all of the story. While we don’t have a specific measure for units, the annual inflation rate in the U.S. is currently sitting at about 2.5 percent versus the projected 7 percent increase in spend, so this could mean somewhere between 4 to 5 percent in actual non-price-related growth.”
A chart from the PwC report shows spending by demographic cohort.
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Pedersen, who was one of the authors of the report, also noted there were differences in regional expected spending. PwC estimates the South will see consumers increase spending by 29 percent as compared to 2022 levels. The West is pegged to see a 15 percent increase while the Midwest will experience a 12 percent gain. In the Northeast, consumers are expected to spend just 0.4 percent more.
“Surprisingly, the divergence in spending has become increasingly apparent even as GDP is projected to grow at 3 percent in second quarter 2024,” the report’s authors said. “Nearly three in 10 consumers (29 percent) plan to spend less compared to the 2023 season — up 10 percent from last year — expecting to spend just $776 this season. However, 26 percent are ready to spend more, allocating a considerable $3,076 (a 33 percent increase in budget from 2023).”
The report also noted that 34 percent of consumers who earn more than $65,000 per year “say they will spend more, while just one-fifth (21 percent) of those earning under $65,000 say the same, suggesting that the bifurcation in spending patterns is correlated (though not entirely) with the bifurcation in income.”
Regarding shoppers embracing physical stores, Pedersen told WWD that this trend “has been evident over the past year, with in-store traffic rates surpassing 2019 levels for many retailers.” He said it was important to consider that Gen Z shoppers are showing the largest planned increase in shopping this year. “This generation tends to visit stores more frequently than others, not just for shopping but also for returns and socialization,” Pedersen said. “Many retailers have reported that Gen Z is a key driver of the growth in store traffic.”
He also said there is a shorter window between Black Friday and Cyber Monday and Christmas this year. “Concerns about delivery timing and receiving goods before Christmas may drive more people to shop in-store to ensure they have their gifts on time,” Pedersen said.
