Every quarter, we ask US consumers how they feel about the economy and how those sentiments influence their spending. As inflation and rising costs1 continue to weigh on households, we conducted a targeted survey to understand how consumers are planning for the holiday season ahead.
Our findings reveal that many shoppers are approaching the holidays with caution and practicality, adjusting their budgets and habits accordingly. Many consumers plan to scale back on discretionary and semi-discretionary purchases, a shift that has prompted some to begin their holiday shopping earlier than usual with a stronger focus on essentials.
The following charts present insights from our latest ConsumerWise research, offering a closer look at how shoppers are navigating these challenges as they gear up for the holidays.
Consumer optimism has been steadily declining since November 2024. While pessimism has shown more volatility, it too has experienced a recent drop. Together, these shifts have driven net sentiment—the gap between optimism and pessimism—to a level 35 percent below its peak in November last year.
Rising prices, fueled by persistent inflation, remain the leading concern for consumers. Notably, concerns about tariffs have eased, with 24 percent fewer consumers citing them as a primary issue than in the previous quarter.
Across income groups and generations, sentiments reflect a growing sense of caution and uncertainty. More individuals express mixed feelings about the economy, highlighting how economic pressures are taking a toll on consumer confidence.
Consumer say they plan to prioritize essentials over the next three months, with net intent remaining positive across most necessity-driven categories. However, this trend shifts when it comes to semi-discretionary items, where spending intent shows noticeable cuts, and net intent turns negative across many categories.
The most striking development is the sharp decline in discretionary spending intentions. Although higher-income consumers are somewhat less affected by this pullback, this trend is observed across all income groups. This underscores a broader, cautious approach to spending as economic pressures continue to shape consumer behavior.
Consumers are likely to change their shopping habits this holiday season, reflecting an increasingly diverse shopping landscape across generations. Our survey findings show a blend of practicality, tradition, and varying levels of engagement between age groups.
Millennials are leading the trend of shopping earlier in the year, with 37 percent starting before October—significantly higher than the 28 percent average across all generations.
Meanwhile, only 11 percent of consumers surveyed are planning to kick off their shopping during Black Friday weekend. Gen Z stands out as an outlier, with 17 percent still associating Black Friday with the start of their holiday shopping.
Baby boomers are showing a reluctance to engage in holiday shopping altogether. A significant 22 percent of boomers report they don’t plan to participate in holiday shopping this year, eight percentage points higher than the cross-generational average.
I choose Black Friday weekend specifically for all the incredible sales and savings. I love it. That’s when I get the most bang for my buck‚ and it makes holiday shopping less daunting and more manageable.
Nearly half (46 percent) of US consumers plan to keep their holiday spending in line with last year’s levels, while roughly one in four intend to spend less. This share is significantly lower than in many European countries, where a greater proportion of shoppers intend to maintain their holiday budgets.
But spending intentions vary significantly by income group: 65 percent of high-income consumers plan to spend the same or more compared to last year, while this figure drops to 56 percent for middle-income shoppers and just 48 percent for those in lower-income brackets. This disparity highlights how economic pressures are disproportionately affecting lower-income households who are less optimistic about the economy, further shaping holiday spending behaviors.
Many consumers have clear preferences on shopping channels as well. About one-third of consumers plan to shop mostly or entirely online, while only 16 percent intend to do most, if not all, of their shopping in-store. This underscores the continued growth of e-commerce and digital convenience. However, the majority (54 percent) of consumers intend to split their shopping between online and in-store, signaling that the in-person shopping experience still holds value for many.
I’m going to be spending the most on gift cards this holiday season, because I really can’t afford shipping costs for anything else. Gift cards are inexpensive to ship, and they tend to make my family and friends the happiest because then they can pick out their own gifts. A lot of my friends and family members are suffering financially this year, and actually a gift card for a grocery store or even a gas station would be appreciated more than a piece of jewelry or artwork or a typical Christmas gift.
Spending trends for the upcoming holiday season reveal notable differences in preferences and priorities. Gift cards take the top spot as the most popular planned purchase, with 46 percent of baby boomers leading the charge. Groceries and food for home follows closely as the category where consumers plan on spending, also driven predominantly by baby boomers. This focus on gift cards and food highlights a priority on holiday hosting, entertaining, and practical gifting even amid economic pressures and uncertainty.
Groceries are the one item that’s definitely gone up in price a lot recently. And I will have my whole family here for the holidays, so I will have to feed them. So, I think groceries will be probably the most expensive thing I buy.
With the holiday season fast approaching, economic pressures, shifting sentiments, and evolving shopping preferences are creating both challenges and opportunities for retailers and consumer goods companies. Success in this environment lies in taking decisive action to address emerging consumer needs. This includes offering value-driven options that appeal to budget-conscious shoppers, enhancing omnichannel experiences to provide seamless online and in-store integration, and tailoring strategies to reflect the distinct spending priorities of different demographics.
Targeted promotions in the consumer-packaged goods sector can engage consumers who are looking for practical gifts or ways to “treat” family and friends while celebrating at home. Aligning strategies with these imperatives enables businesses to adapt to the cautious yet intentional consumer mindset and position themselves to thrive during the year’s most critical shopping period.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office; Christina Adams is a partner in the Dallas office; and Kari Alldredge is a partner in the Minneapolis office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
An update on US consumer sentiment: In response to tariffs, most consumers plan to adjust spending
By Becca Coggins, Christina Adams, and Kari Alldredge
Consumer sentiment dropped precipitously as tariff news spread. Here’s the latest research from our ConsumerWise team.
Every quarter, we ask US consumers how they feel about the economy and how those sentiments might influence their spending. Earlier this spring, following announcements that global trade tariffs could be imposed, both markets and consumers reacted sharply.
We conducted a targeted survey in May to understand how tariffs are shaping consumer concerns and behaviors. What we found was that net sentiment2 dropped 32 percent in May, a nine-percentage-point swing from the previous quarter. While inflation remains consumers’ top concern, tariffs have quickly risen to second place.
Despite news of tentative trade deals, uncertainty and volatility persist in the US market, and consumers may explore a range of personal financial behaviors to protect their pocketbooks.
The following charts showcase the findings from our latest ConsumerWise research.
In the United States, 43 percent of consumers reported rising prices as their top concern, followed by tariff policies (29 percent). This comes as little surprise, given how much the discussions of global trade have occupied the American media and how engaged with tariff-related news US consumers said they have been (91 percent of consumers in the United States heard about tariffs in the news or discussed the topic with others).
Most consumers surveyed said they either have already changed their spending habits or expect to change them soon in response to tariff announcements—even if the tariffs’ effects have yet to hit store shelves. However, consumer responses varied by generation: Gen Z and millennials were more likely to say they expect to change their spending habits, while baby boomers appeared more resistant to change. One reason for these findings could be that US boomers in our previous surveys were already the least likely to splurge, meaning there could be less impetus for them to change their spending habits in response to greater economic uncertainty.
Consumers who said they expect to change their behaviors often cited traditional trade-down actions, including cutting back spending on nonessential items, purchasing fewer items, or switching to lower-priced brands and products. Again, generational differences emerged in the data: Baby boomers said they were most likely to cut back on nonessential spending (12 percentage points higher than the average response across age groups).
Many of Gen Z’s responses trended in the opposite direction compared with baby boomers. For example, Gen Zers were much more likely to purchase items secondhand in response to tariff news (seven percentage points higher than the average response across age groups), while boomers were much less likely to do so. Gen Zers may need to purchase essential items, such as vehicles, secondhand, as prices for new vehicles may be out of reach for many of them. However, Gen Zers may also be more open to secondhand purchasing in categories such as apparel, even if their budget allows for non-secondhand purchases.
Unsurprisingly, we observed a split between how lower-income and higher-income consumers plan to cut back on their spending. Low-income consumers were the most likely to say they would switch to a lower-priced brand or product (13 percentage points more likely than consumers who report making more than $100,000 a year). This trend was true across generational lines: Wealthier baby boomers were less likely to say they would change their habits, but baby boomers who are financially constrained were more likely to adapt their spending, particularly in nonessential categories.
When we looked at responses by category, 50 percent of consumers said they expect to delay purchasing in discretionary categories, such as electronics, accessories and jewelry, or dining out. Forty percent of consumers said they expect to make no change to spending on essentials, including groceries, vitamins and supplements, and gasoline.
US consumer sentiment has declined sharply in response to tariff-related news, and tariffs emerged as a top concern, second only to inflation, prompting many consumers to make—or at least consider—changes in their spending habits. As uncertainty around trade policy continues, consumers could remain cautious and increasingly selective in their discretionary spending.
To contact us for more information or to read additional insights, check out our ConsumerWise page.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, and Kari Alldredge is a partner in the Minneapolis office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
An update on US consumer sentiment: Is growing uncertainty casting a chill on spending plans?
By Becca Coggins, Christina Adams, and Kari Alldredge
US consumers remained optimistic about the economy at the beginning of the year, but caution around spending persisted. Here’s the latest research from our ConsumerWise team.
In the first quarter of 2025, US consumers reported feeling nearly as optimistic as they did at the end of the previous year. This optimism was buoyed by a robust economy with low unemployment, steady job growth, and stable inflation. However, for US consumers across income groups and generations, spending intentions were down across several discretionary categories. Unlike in early 2024 (when consumers carried their approach to holiday spending into the new year), consumers this year reverted to their typical approach to new-year spending.
The following five charts showcase findings from our latest ConsumerWise survey.
Thanks to stable inflation, low unemployment, and ongoing job growth, a plurality of US consumers (46 percent) felt optimistic in the first quarter of the year. However, not all consumers shared this sentiment. Just over a third of surveyed consumers reported mixed feelings about the economy, and pessimism ticked up slightly from the previous quarter. Despite citing stable inflation as a reason for feeling optimistic, half of consumers also said that rising prices were their biggest worry. Notably, older consumers were more concerned about inflation compared with younger ones.
While the greatest share of consumers felt optimistic about the economy, sentiment around household finances was more mixed. Many Gen Z respondents, for example, felt financial strain, with fewer reporting income gains and more indicating they dipped into their savings at higher rates.
Overall, I’m planning to spend less simply because prices of basic needs like utilities, eggs, food in general, and fresh items have increased. So I’ll probably spend a little less on apparel and other things like shoes, and maybe less on vacations, than I have in the past.
Consumers reported their plans to decrease spending across many discretionary categories. This suggests that even optimistic consumers, in addition to consumers who feel uncertainty and pessimism about the economy, may hold back when it comes to spending.
Even so, consumers’ reported spending intentions were nuanced. Consumers, particularly among Gen X and Gen Z respondents, said they planned to cut back spending on discretionary categories such as apparel, footwear, and electronics, while they planned to increase spending on cruises and international flights compared with the previous quarter. This is in line with seasonal expectations, as many consumers are planning their spring break getaways. Similar to this time last year, consumers across age groups said they planned to increase spending on home improvement and gardening supplies as they prepare for spring.
We spent a lot last year . . . so now we’re buying actual necessities and looking for good deals. We want to be intentional with our money and ensure that our money goes as far as it can possibly go. We need to be able to afford to live in the current economy, which doesn’t seem to be changing. So we need to do our best to tighten our belts.
Overall, trade-down behavior remained consistent and pervasive. Three-quarters of consumers said they traded down in the first quarter of the year (up one percentage point from the end of 2024), though baby boomers and high-income consumers said they traded down less frequently than they did in the previous quarter. It is possible that baby boomers chose to abide by their usual purchasing patterns and brand preferences despite being worried about inflation. Millennials, for their part, were more likely to trade down by adjusting the quantity and pack sizes of their purchases.
Given high food prices, grocery spending was a particularly ripe category for trading down. Indeed, far more low-income households—51 percent compared with 40 percent in the previous quarter—traded down for meat and dairy products as prices soared. Even high-income households made more economical choices in the packaged-food category, opting for lower-priced brands and more private labels, than they did in December.
Intentions to splurge varied by demographic groups. Take baby boomers: Not only were baby boomers across income groups the least likely to splurge (only 20 percent reported an intent to splurge in the first quarter), but even fewer of them reported an intention to splurge in the first quarter of 2025. This could be because they felt they overspent during the holidays. Compare that with millennials: Just over half of millennials across all income groups said they intended to splurge, and significantly more high-income millennials (63 percent) planned to splurge, particularly on travel and jewelry, compared with the previous quarter.
After splurging on several discretionary categories over the holidays, fewer consumers said they planned to splurge in categories such as apparel, footwear, and beauty and personal care products, keeping with seasonal trends. One nonfood category stood out as particularly splurge-worthy: travel. Planning for their spring and summer holidays, more Gen Xers and boomers reported their intention to splurge on travel compared with other age groups and the greatest increase in intention to splurge on travel compared with the previous quarter.
As for food-related splurging, consumers said they planned to splurge most on restaurants and groceries. Still, fewer consumers planned to splurge on these items compared with 2024. This may indicate a shifting mindset among consumers: Since food prices continue to rise, consumers may be allocating a greater portion of their budgets to food spending, which means that these purchases may feel less like splurges and more like the status quo.
We don’t spend a lot of money on other types of entertainment at home, but we enjoy luxury travel at high-end resorts. We use airline and credit card points, so we try to get the most out of our travel. I’m worried about inflation and everyday things costing more, but right now, I don’t think it’s going to affect how we travel.
Optimism might have been the prevailing feeling among US consumers in the first quarter of the year, but spending intentions across demographic groups nevertheless remained mixed. These shifts underscored different priorities across age groups and income levels. As economic data continues to fluctuate—for instance, inflation rose above economists’ expectations in January—consumer players should keep a close eye on whether consumer sentiment and behavior align once again. To contact us for more information or to read additional insights, check out our ConsumerWise page.
To see previous ConsumerWise insights, visit our page of 2024 research.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, and Kari Alldredge is a partner in the Minneapolis office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Braj Bhadauria, Christina Anderson, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
