Shoppers Cutting Back Big-Time This Holiday (Except the Rich)

An annual JLL poll forecasts a 10.2% overall decrease in U.S. holiday spending to $1,133, primarily driven by lower- and middle-income consumers cutting back due to job market concerns and tariff uncertainty. In contrast, high-income households (over $150,000) plan to increase their holiday budgets by 26% to nearly $2,000, signaling a significant divergence in consumer behavior across income brackets. Despite this near-term caution and a shift towards prioritizing gifts for others over self-purchases, retailers maintain long-term optimism regarding consumer spending recovery.

Analysis

The JLL annual poll projects a 10.2% year-over-year decline in average U.S. holiday spending to $1,133, primarily driven by lower- and middle-income consumers. Households earning less than $50,000 plan a 24% reduction to $699, while those in the $50,000-$100,000 bracket anticipate a 5% cut to $1,207. This contrasts sharply with high-income households ($150,000+), which expect to increase their holiday budgets by 26% to nearly $2,000.

This spending divergence is attributed to a "soft job market" and "constant talk of tariffs," fostering consumer doubt despite retailers' assurances of absorbing cost increases. Naveen Jaggi of JLL noted that stock market highs are "irrelevant" for 50% of U.S. households, highlighting a disconnect between market performance and broader consumer purchasing power. The survey also reveals a shift towards "thoughtful, strategic holiday spending," with 25% of respondents not planning self-purchases, up from 17.3% last year.

Despite the near-term cautious consumer outlook, U.S. retailers maintain long-term optimism for spending recovery, according to Jaggi. This suggests a potential short-term headwind for general retail, particularly for segments reliant on middle and lower-income discretionary spending. The shift away from self-purchases (accessories/jewelry down to 29.1% from 39.3%) further underscores a prioritization of gifts for others over personal indulgence.

Key Decisions for Investors

• Investors should evaluate retail portfolio exposure to income demographics, as high-end luxury segments may show resilience while mass-market retailers face headwinds from cautious lower and middle-income spending.
• Consider companies with strong value propositions or those focused on essential goods, as these may prove more resilient amidst a shift towards "thoughtful, strategic holiday spending" and reduced self-purchases.
• Monitor retailers' long-term guidance and adaptation strategies, balancing the near-term cautious consumer outlook with reported industry optimism for a future spending recovery.