As the holiday shopping season commences, new data from Deloitte indicates that American consumers plan to reduce their spending by 4% this year between Black Friday and Cyber Monday compared to 2024. This decrease is attributed to rising living costs and economic uncertainty affecting households across all income levels. Specifically, consumers earning less than $50,000 are projected to spend 12% less, while those with incomes exceeding $200,000 anticipate an 18% reduction in holiday expenditures.

Natalie Martini, Deloitte’s vice chair and U.S. retail and consumer products leader, noted that despite the expected pullback in spending, strong participation in holiday shopping is still anticipated. The survey, which included 1,200 consumers across the United States, was conducted between October 15 and October 23. Consumer confidence has reached one of its lowest points on record, as reported by the University of Michigan’s consumer sentiment survey. This decline is closely linked to concerns about the economy and personal financial situations, with affordability identified as a primary concern by voters in November, contributing to Democratic electoral successes in several states.

In response to rising food costs, former President Donald Trump has attempted to alleviate some financial pressure by removing tariffs on food imports, including beef and coffee from Brazil. However, the University of Michigan survey revealed that 69% of respondents expect unemployment to rise in the coming year, a significant increase from the previous year. Despite a slight uptick in sentiment following the end of a federal shutdown, consumers continue to express frustration over persistent high prices and declining incomes. Inflation rates, which had previously slowed, have been on the rise since April, reaching an annual rate of 3% in September, with many consumers expecting inflation to remain high at 4.5% for the following year.

Recent retail earnings reports highlight troubling trends in consumer behavior. Walmart reported strong performance, benefiting from shoppers seeking savings on essential items. The retailer noted that higher-income families are increasingly shopping at discount stores, while lower-income families face heightened financial challenges. As financial pressures mount, consumers are prioritizing necessities over discretionary spending. Reports indicate that many shoppers are turning to financing options to manage their purchases, with a PayPal report revealing that half of consumers plan to utilize buy now, pay later services for their holiday shopping. These services, which allow for installment payments, are particularly popular among younger consumers, with 39% of Gen Z and millennials indicating they will use such options.

As Thanksgiving approaches, many consumers are expressing concerns about rising food prices, reflecting broader worries about inflation. Polls indicate that the cost of living is a significant issue for many families. While former President Trump has highlighted Walmart's Thanksgiving promotions as evidence of decreasing grocery costs, the reality is more complex. Economists note that the price of a Thanksgiving meal can vary widely based on individual shopping choices. David Ortega, a food economist at Michigan State University, explains that the overall cost will depend on the items selected and the stores visited.

Reports from the Wells Fargo Agri-Food Institute suggest that a typical Thanksgiving menu could be 2% to 3% cheaper for some shoppers, particularly those opting for store-brand products. Conversely, an analysis by Groundwork Collaborative, the Century Foundation, and the American Federation of Teachers indicates that prices for Thanksgiving food staples may rise nearly 10% this year, especially for name-brand items. The pricing dynamics are influenced by competition among grocery retailers, which often use holiday promotions to attract customers. Turkeys, in particular, are frequently sold at low prices as loss leaders to draw shoppers into stores.

Walmart, as the largest grocery retailer in the U.S., has engaged in promotional efforts to highlight its Thanksgiving offerings. The company has introduced a new basket of Thanksgiving items, which it claims is its lowest yet. However, this basket has been adjusted from previous years, featuring fewer items and more store-brand products. Changes in the basket reflect ongoing shifts in food pricing, exacerbated by tariffs imposed during Trump's administration, particularly on steel and aluminum, which have affected packaging costs. Despite some tariff reversals on food imports, the high tariffs on steel and aluminum are expected to have lasting impacts on food prices. Additionally, climate-related events, such as droughts, have further complicated the pricing landscape for various food products.

As consumers prepare for the holiday, the uncertainty surrounding food prices remains a significant concern, with many feeling the cumulative effects of inflation over recent years. Ortega highlights that food prices have risen more than 25% over the past five years, underscoring the ongoing challenges faced by families during this holiday season.