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Tariff and Inflation Jitters

This year, the holiday vibe isn’t so merry as tariff and inflation jitters keep folks on edge. Across the income spectrum, U.S. consumers are treading cautiously. Tariff and inflation jitters have had them anxious most of the year.

Dipping Economic Optimism

Optimism about the economy? It’s taken a nosedive, even among higher-income folks. William Blair analysts, led by Sharon Zackfia, noted this mood change. “Consumers are worried about inflation, geopolitical tension, and tariff chaos,” Zackfia explained.

This month, consumer sentiment dropped by 6%, according to the University of Michigan. These lower expectations about business and personal finances have even those with hefty stock portfolios concerned.

Employment Blues

The young guns are feeling it big time. Their income growth is sluggish, and a record number of job cuts hasn’t helped. Last month, we saw the highest number of layoffs in 22 years, as reported by Challenger, Gray and Christmas. Hiring? It’s slowed down too, warns UBS economists.

Retailers’ Challenges

This economic backdrop shapes how, when, and how much everyone’s spending during the holidays. Retailers are trying to navigate their own tariff obstacles. Key operations like inventory management, pricing, and marketing have faced their own hurdles.

Early Shopping Strategies

Shopping Early

Consumers are getting ahead of the game, stretching those budgets and snagging deals. Searches for “Christmas” spiked on Faire’s wholesale marketplace. Circana says over 40% of U.S. shoppers are starting their holiday shopping early this year.

“We want value,” says Marshal Cohen from Circana. Early shopping gives consumers better control over their purchases—less last-minute panic, more savvy choices.

Putting Off Payment

But here’s the twist, folks might buy sooner but they’re paying later. BNPL (buy now, pay later) is the new mantra. Almost 75% of consumers use BNPL services. LegalShield’s survey found many plan to shop more with BNPL.

But there’s risk. FICO’s credit scoring now accounts for BNPL. Gen Z is embracing it, but they’re unaware of the credit impact.

Bargain Hunting

Seeking Value

In this economy, folks are cutting back hard on extras. Almost three-quarters surveyed by William Blair are making cutbacks. Apparel spending? Down by nearly 60%. Budgets for essentials like groceries and travel are also shrinking.

Even industry giants are noticing changes. PayPal reported softer consumer spending in Q3. Transactions are up, but average order values have dipped.

Savvy Shopping

Amid all this, holiday shoppers expect to spend but are chasing deals. Many are waiting for sales like Black Friday—still regarded by a quarter of consumers as prime time for bargains.

“Consumers are less impulsive, focusing on ‘need-now, buy-now,’” Cohen points out. Marketers, take note. Hit that sweet spot of product and value at just the right time.