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CBS NEWS – More consumers will be feeling jolly this holiday season, pushing up holiday spending by 5 percent to $1,250 each, thanks to a growing economy, according to consulting company PwC.
The biggest spenders this year will include men, high-earning millennials and Amazon Prime members, the study found. On the flip side, several types of consumers said they’re likely to cut back this year, including people living in small towns and rural areas.
Holiday spending has been recovering since the 2008 recession, when Americans tightened their budgets and cut their outlays by about 5 percent that year, according to the National Retail Federation. Now, even as consumers want to spend more, they’re still placing an emphasis on striking a good deal, PwC said.
“Shoppers told us they want the best value for their money this holiday,” the report said. “Their next priority was a stress-free experience. They also told us they don’t want to spend too much time shopping and they don’t want to have to go to a lot of different stores.”
Even though consumer spending has been increasing each year since the Great Recession ended, the retail industry is struggling to adapt to changing tastes and shopping habits. One holiday stalwart, Toys R Us, closed up shop for good earlier this year, a victim of a consumer shift to online shopping and heavy debt from its leveraged buyout.
Nevertheless, nine out of 10 Americans told PwC they plan to shop in brick-and-mortar stores this holiday season. Stores are investing in redesigns and hiring staff make them easier to navigate and more pleasant to shop in, the consulting firm said.
“The brick and mortar stores that deliver integrated offerings are the ones that will thrive and survive the years to come,” said Steve Barr, consumer markets leader at PwC, in an email. “For example, the retailers that are engaging with the consumer across all platforms – in store, online, mobile – those are the ones that are going to stay relevant.”
Spending on family
Consumers will spend about $693 each on gifts, $361 on travel and $196 on entertainment, PwC found. More than half of that will be directed toward family members, while another 28 percent will be spent on themselves. Less than 10 percent will be spent on friends.
Millennials who earn more than $70,000 a year are projected to be among the most lavish spenders this holiday season, shelling out an average of $2,021. By comparison, millennials who earn less than $70,000 say they’ll spend less than half that, at $839.
“Last year and this year, we’ve seen millennial dads come out as the biggest spenders,” Barr said. “This year, 89 percent of millennial dads said they will spend the same or more than they did last year.”
When it comes to holiday shopping and gender, men are bigger spenders than women, the study found. Men said they expect to spend more than $1,400 this holiday season on average, compared with about $1,100 for women.
Given that men typically earn more than women, it’s probably not surprising they plan to spend more over the holidays.
Suburban shoppers also say they’ll open up their wallets this year, spending an average $1,362.
Not everyone is feeling sanguine as the holidays approach. One out of 10 consumers told PwC they plan to spend less this year. Three groups in particular are the most likely to trim spending.
Almost one out of five residents in small towns and rural areas say they’ll cut back this year, PwC found. On average, small-town residents are budgeting about $984 on the holidays, compared with $1,336 for people in large cities. While the recovery has lifted the economic fortunes of large cities, many rural areas and small towns are lagging, according to Brookings Institution research.
Consumers earning less that $25,000
About one of five consumers with less than $25,000 in annual average income will pare spending this holiday season. Low-income workers have struggled to gain traction in the post-recession recovery. Workers who earn median income of about $25,000 got a raise of about $120 last year, or less than half a percentage point, according to Census data released in September.
One out of five consumers who are unemployed plan to spend less this holiday season. Unemployment is at an 18-year low, but 6.2 million Americans are out of work, according to the Bureau of Labor Statistics. About one-third of them have been unemployed for less than five weeks, while one-quarter have been looking for work for more than half a year.