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Canadians plan to spend an average of $1,853 over the holiday season this year, a 13 per cent increase from last year, according to a PwC survey, even as a higher cost of living continues to weigh on consumers.
According to the survey of 1,000 Canadians from across the country, consumers plan on increasing their holiday budgets this year, spending more on gifts, travel and entertainment than they did last year. The rise in spending comes amid an improvement in optimism about the economy, with 65 per cent of respondents saying they believe the economy will stabilize or improve in the coming months, up from 48 per cent last year.
Still, while the outlook for the economy has improved amid falling interest rates, PwC Canada’s national retail and consumer leader Elisa Swern says the increase in overall holiday spending is largely due to inflationary costs.
“It’s less about ‘I want to spend more money’, and more about ‘I know what I want to buy, and the cost of those items has gone up’,” Swern said in an interview with Yahoo Finance Canada.
“The overall economic outlook is brightening as inflation and interest rates are coming down, and there is a belief that the economy is going to start to stabilize. But having said that, one of the big things that was top of mind for consumers is looking at discounts and promotions and different ways to stretch their holiday budget.”
While many consumers will be on the hunt for savings this year, younger shoppers plan on spending more than older generations. Baby boomers plan to spend $1,412 on average this year on the holidays, down nine per cent compared to last year, while Gen X shoppers intend on spending $1,766 this year, a decline of 11 per cent from 2023.
Millennials and Gen Z shoppers, on the other hand, are significantly hiking their budgets for the holidays. Millennials say they will spend $2,233 this year on the holidays, up 51 per cent compared to last year. But Gen Z shoppers top the list, with plans to spend $2,296 this year, an increase of 55 per cent compared to last year.
Swern expects that Gen Z shoppers may not have as many expenses as older generations, hence the higher spending.
“They might still be living at home, they’re less likely to own a home at this point and perhaps less likely to have children. Some of their costs are lower, so they may have a bit more to spend,” she said.
“But they’re also the demographic that’s most open to dipping into their savings for holiday spending, as well as look to payment options like buy now and pay later.”
Gen Z shoppers also prefer physical items over gift cards, with apparel, cosmetics and beauty products, jewellery and accessories topping their shopping lists. For millennials, Gen X and baby boomer shoppers, the survey says gift cards are their top or second-most common gift to give. Gen Z also say they are more likely to buy higher-quality products that last longer, or second-hand items from a brand to make their budget go further.
Still, the growing optimism about the economy and higher spending is a positive sign for the retail industry, says retail analyst Bruce Winder.
“It’s a bit surprising, but you can feel some of the positive momentum slowly starting as interest rates come down,” Winder said in an interview. He also points to Amazon’s recent announcement that the company is hiring 9,000 full-time, part-time and seasonal roles to serve its Canadian operations, as a sign of consumer optimism.
“When we start to see big companies spending again, it gives me a bit of hope that maybe the retail sector might be picking up again.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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