(Bloomberg) -- US shoppers are expected to boost their holiday spending this year — but the increase masks growing stress among lower-income consumers, according to PwC.
The average shopper is expected to spend $1,638 this year, or 7% more than in 2023, PwC said in its annual holiday outlook. That growth is a sign that consumers are staying resilient despite years of rising prices that have eroded purchasing power.
Nonetheless, companies should prepare for heightened price sensitivity, according to PwC, and 85% of consumers are looking to cut back, mostly on nonessential categories such as eating out and luxury items.
“Many brands already find themselves in a tricky spot” as high prices erode customers’ brand loyalty and they switch to private labels and store brands, PwC researchers wrote. Companies will have to focus on “strategic pricing and promotion,” improve their products, and reduce their costs to counter the trend, according to the report.
Many of the biggest US retailers, such as Walmart Inc. and Target Corp. have reported healthy results as they head into crucial year-end period. Costco Wholesale Corp. last week said it’s expecting higher spending this year, but more deals as consumers look for the promotions. Discount retailers such as Dollar General Corp. have posted weak results as low-income consumers cut back.
See also: Online Holiday Spending Projected to Rise 8.4%, Most Since 2021
Gen Z customers, who are between the age of 12 and 27, and the older millennials are driving much of this year’s growth, according to PwC, while Gen X and Baby Boomers are planning to spend less than a year ago.
©2024 Bloomberg L.P.