Shoppers are heading into the holidays with spending plans intact

Americans are nervous about the economy. They are concerned about the higher tariffs. They are afraid of a sizzling job market.

They are already willing to spend money during the holiday shopping season.

Economists are forecasting healthy levels of consumer spending in the final weeks of the year, continuing a period of surprising resilience. Although there is evidence that lower-income people are under increasing pressure from persistent inflation and weaker hiring, economists say many consumers have enough buffer to buy gifts and other holiday items.

Wealthier households in particular are likely to buy freely, driven by a sharply rising stock market, thus offsetting slower spending across the income spectrum. Surveys and other data suggest that consumers broadly intend to spend the same or more on holiday shopping compared to last year.

“We’re expecting a pretty solid holiday shopping season,” said Michelle Meyer, chief economist at Mastercard, who estimated holiday spending would rise 3.6 percent from last year. “It looks like the momentum is moving in the right direction.”

Nick Hennessy, 34, makes $65,000 a year as a manager at an Amazon print-on-demand facility. His salary is enough to rent a small apartment in an old building in Portland, Oregon, and he pays his credit card bills and contributes a modest amount to his retirement fund each month.

At the same time, he must make a monthly student loan payment of $227, which the federal government had been deferring for a while. His weekly grocery bills, including pre-made lunches from Trader Joe’s as well as milk, yogurt, cereal, eggs and fruit, have increased from about $55 to $75.

“I weigh less, so I know I don’t eat more,” he said.

These additional expenses have put a strain on his finances. Still, he said he plans to spend about $500 on Christmas presents for his girlfriend and parents this year. That’s about the same amount as last year, he said, and more than in the years he was paid hourly.

“I actually have more income than before,” he said. “I can find more room in the budget for these little things.”

The holiday shopping season, now stretching through November and December, is approaching as consumer confidence in the economy’s performance has fallen, with many citing the strain of higher prices and the prospect of falling incomes.

This gloom has not led to a broad decline in spending. Retail sales rose 0.2 percent in September from the previous month, the Commerce Department reported Tuesday.

Much of the purchasing power has been driven by wealthy consumers who have increased their purchases amid a booming stock market that has made them richer. According to an estimate by Moody’s Analytics, the top 10 percent of households are responsible for nearly half of all consumer spending.

Lower-income consumers have been less immune to rising prices and slower job growth. Because they spend more of their income on cheaper imported goods, they are more exposed to tariffs. The jump in wages for the lowest-paid workers as a result of the Covid-19 pandemic has subsided, weakening their purchasing power.

Many have cut back on discretionary purchases and shifted their spending to essentials like groceries, gas and rent.

“We’re already seeing some signs of people tightening their belts from various retailers and companies,” said Joanne Hsu, an economist and director of consumer surveys at the University of Michigan.

This dynamic creates a split screen among retailers that could become even more pronounced during the holidays.

Walmart, for example, told analysts last week that lower-income customers were retreating while those with higher incomes flocked to stores.

“We continue to benefit from higher-income families shopping with us more often,” Walmart Chief Executive Doug McMillon said, although he also noted that “lower-income families have been under additional pressure recently.”

Consumers are in increasingly dire straits. The unemployment rate among young people and black workers has risen sharply in recent months. And hundreds of thousands of jobs are affected by federal spending cuts.

Jennifer Plante, 44, of Essex Junction, Vt., said she has come to terms with the idea that “there probably won’t be any gift giving this year, which is a disappointment.”

After losing her job with a government international development contractor this year, she took a part-time job at a bakery that paid $15 an hour. When the government shut down, her husband, a federal employee, was furloughed.

Last month, she got a job on an exchange program at a local non-governmental organization with a salary of $68,000, about half her previous income. To pay her monthly bills, she and her husband dipped into their savings. They have canceled home improvement projects, including the purchase of a heat pump, and limited dining out. Once a week, she said, they treat themselves to yogurt from a local dairy.

“Right now we’re barely spending anything,” she said.

But for the most part, even many lower-income consumers are in good enough financial shape to spend during the holidays, economists say.

According to the Federal Reserve Bank of New York’s quarterly report on household debt and credit, the credit card delinquency rate rose in the third quarter but is below levels in the middle of last year. Bank of America said households of all income levels held more deposits in October than on average in 2019 and that it did not appear they were drawing too heavily on their savings.

A recent survey of Americans earning less than $75,000 a year by consulting firm Consumer Collective found that almost all planned to buy gifts for the holidays.

Many said they planned to spend less than $500, and a quarter said they would spend between $100 and $300. The fact that they have any intention to purchase at all underlines that many consumers view vacation as a necessity.

After Nancy Cooley, 28, lost her job at a bank branch in Atlanta last November, her situation came to a head.

Her car broke down and she didn’t have enough money to buy a new one. She was evicted from her apartment and had to give up her cat. When she couldn’t pay her car loan or credit card bill, her car was repossessed and she filed for bankruptcy. She lives with friends and works as a claims adjuster for an insurance company, making about $21 an hour.

When her friends recently suggested buying matching Christmas pajamas, the thought of purchasing such a choice item scared her, she said. But that didn’t stop her from paying the $20 – or spending money on other Christmas gifts.

“The only way I wouldn’t do it is if I really didn’t have it,” she said.