The holiday season is traditionally a time of high spending and a high volume of consumer activity, with 2024 breaking records from previous years. However, early studies are showing that 2025 is expected to be a slower season, with reduced consumer spending and a stronger focus on value and savings.
The market pulse index is a way to measure and forecast trends on how consumers prepare for the holiday season. The data offers a multidimensional view of consumer finances in the United States, analyzing key components influencing how these factors interact and evolve throughout the year and beyond. The index this year is indicating that most generations, aside from Baby Boomers, are seeing a decrease from the previous year.
The factors that influence this index, specifically this year, are increasing delinquencies, particularly in younger generations, wealth and income volatility, student loan impacts and high savings rates. These factors are largely due to today’s volatile market, shaping financial data points such as individual consumer credit, debt, income, assets and capacity. Capacity refers to a consumer’s ability to continue meeting spending and debt obligations during periods of financial stress. This stability or lack thereof paints a picture for lenders to better understand and predict consumer behavior.
Overall, this data is indicating that consumers are treading lightly. Heading into the holiday season, spending is slowing and consumers are acting more according to their income and financial instability rather than on impulse. Middle income households across the country are experiencing tighter budgets, some experiencing a staggering 22% income change. In fact, the typical United States consumer has seen a 12% decrease in median total assets over the past 3 years. Data shows that 132 million households are reporting under $6,000 in checking as a median number, and generation Z is taking the greatest hit.
Generation Z is the group to watch, as overall credit consumers in the age group have doubled since 2021. America’s biggest spenders have the power to shift the tides when it comes to holiday shopping, which is why it’s important for both lenders and retailers to have a strong pulse of their goals and habits.
Studies have uncovered four main behavior trends to watch for the upcoming holiday season based on changes in the data year over year. First, early shopping will be the most popular period for holiday gift shopping. Experts predict that 80% of all planned holiday spending is expected to occur by the end of Cyber Monday, with 39% expected to happen between Thanksgiving and Cyber Monday. Before December even begins, many consumers will have finished holiday shopping for loved ones.
Additionally, Buy Now, Pay Later (BNPL) methods are popular amongst consumers, for many, influencing the outlets and stores from which they shop. These systems help to alleviate the stress of big ticket items, for example, vehicles, furniture, electronics and clothing.
Personalized marketing is also an expectation of consumers, with over 70% of shoppers expecting companies to offer these services. Fast growing companies, studies have shown, drive 40% more revenue from personalized marketing than those that are slower growing. The consumer needs to feel valued, and this style of marketing and communication makes people more inclined to purchase.
Finally, domestic travel is on the rise with Generation Z and Millennials leading the charge. These younger age groups already travel more than anyone else, however, with tighter budgets and value-based spending as the norm, traveling within the US has skyrocketed in popularity. This holiday season, domestic travel will dominate the majority of travel for consumers around the country.
These predictions can help to inform both lenders and retailers on the best ways to prepare for a holiday season unlike no other. For lenders, this data can help to anticipate the demand for more card originations and increased credit and loan requests. Overall, people will be using credit more, wracking up a higher credit balance, and will need more flexibility in their spending capabilities to ensure they can make the purchases they need. Bankcard limits may need to be adjusted as some consumers lean heavier on credit to offset inflation.
For retailers, less savings means less discretionary spending money across the board. With less disposable income, many consumers will only buy when it is necessary or has high value to their wants and needs. Although data shows that most consumers will still spend on close friends and loved ones, the overall value of products and services must be at its highest to win the dollar of the consumer this holiday season.
Source: Equifax