Key takeaways:
- Average gift spending is projected to dip just 2% this year to $708, even as consumer confidence has fallen sharply, according to research by PwC.
- More than half of Gen Z shoppers say they enjoy browsing in physical stores, and screen-free gifts are gaining ground across generations.
- AI use in holiday shopping is climbing to 29% of consumers, but most people still leave the tool to complete their purchase elsewhere.
Consumers feel squeezed, yet when it comes time to actually buy holiday gifts this year, that caution mostly evaporates. PwC’s newly released Holiday Outlook 2026, based on a survey of 4,093 U.S. consumers fielded in June, found that average gift spending is expected to fall just 2% this year, even as the University of Michigan’s consumer confidence index dropped 18.5% year over year over the same period.
That gap between sentiment and spending is the throughline of the report. People expect to spend an average of $708 on gifts this year, down slightly from $721 last year. Parents are still the biggest spenders in the bunch: households with children plan to spend $875 on average, compared with $635 for those without kids.
“People are protecting the parts of the holidays that matter most: the gifts, the family dinner, the traditions,” said Ali Furman, PwC Partner and US Consumer Markets Industry Leader, in an interview with Retail TouchPoints. “They’re finding other places to save. The vibe says cutback. The cart says otherwise.”
Who’s Reining in Spending and Who Isn’t
Not every generation is holding the line equally. Millennials, navigating what PwC describes as an expensive stage of life that includes mortgages and childcare, are pulling back the hardest: gift budgets are down 10% year over year and travel spending is down 37%. Even with that pullback, millennials remain the season’s biggest overall spenders, a reflection of their peak earning years.
Gen Z is forecasting a similar retreat, with gift spending down 9% and travel down 29%, though their total spend remains the lowest of any generation surveyed. Baby boomers are the outlier moving in the opposite direction, with more discretionary income now that major expenses like mortgages and dependent care have eased.
The report links some of this caution to consumers’ shrinking financial cushion. The US personal saving rate fell from 4.5% in January to 2.7% in June, according to the Bureau of Economic Analysis, a sign that households have kept spending even as their buffer thins out. High fuel prices at the time of the survey likely reinforced the instinct to protect gifts and family time while trimming discretionary categories like travel.
In-Person Shopping and Screen-Free Gifts
One of the report’s more counterintuitive findings involves where people plan to shop. Despite being the most digitally fluent generation surveyed, Gen Z is leading a return to physical stores. Seventy-one percent of Gen Z shoppers say they enjoy browsing in person, compared with 60% of consumers overall.
“Gen Z is somewhat of a paradoxical generation,” Furman said. “Digitally native, yet they love shopping in stores; [They’re] cost-conscious but willing to splurge.”
That paradox shows up across the gift list, too. Furman noted that nearly eight in 10 Gen Z consumers are drawn to nostalgic, screen-free gifts (compared to 64% of all consumers) and 81% are prioritizing offline activities. The pull toward analog experiences isn’t limited to what Gen Z buys for themselves. Among those shopping for children, 41% are leaning toward screen-free, hands-on gifts like board games and art supplies, compared with 27% who plan to buy tech devices or tech-enabled entertainment.
Physical retail still wins at checkout, too. Fifty-two percent of consumers plan to browse stores for gift ideas, and 60% expect to buy gifts in person. That’s compared to those who plan so use search engines (42%), social media (29%) and AI-powered tools (14%) to decide what to give.par
AI Becomes a Research Tool, Not Yet a Checkout Tool
AI’s role in holiday shopping is growing, but slowly, and is mostly still being used at the research stage. Twenty-nine percent of consumers plan to use AI somewhere in their shopping journey this year, up from 22% last year. Among those users, 75% turn to AI to research products and 55% use it to compare prices.
“AI is the new coupon-clipping,” Furman said.
Despite that rising usage, most shoppers still aren’t ready to let AI finish the transaction. The majority of AI users research and compare through the tool, then open a separate website or app to actually complete the purchase.
“That’s good news for retailers,” Furman said. “Although the transaction hasn’t moved, the moment that determines whether you make the shortlist has. Retailers that invest now in clean product data, structured pricing and AI-readable content have an opportunity to get a head start.Â
The report also points to a wide range in how well consumers know how to use AI tools. Of the users who shared a sample prompt, 21% qualified as novices and 32% showed developing skill, while 40% were proficient and just 8% reached an advanced level. In other words, most people asking AI for gift help are still closer to typing a basic search query than crafting a tailored request.
What This Means for Retailers and Travel Brands
The travel sector may feel the pullback more acutely than retail. Intent to travel is holding relatively steady, but spending is down sharply as consumers trade down on flights and hotels.
“People still want to travel,” Furman said. “They’re just finding ways to make the math work, whether that means choosing a more affordable hotel, skipping the flight or staying with family.”
For brands trying to capture holiday demand this year, the report’s data suggests a narrower, more deliberate kind of spending, not a wholesale retreat. Furman said that value, not just discounting, is what will move cost-conscious shoppers.
“For travel brands, value isn’t just about discounting,” Furman said. “It’s about helping consumers preserve the experience at a price that feels worth it.”
