Twin Cities shoppers are likely to hold the line on spending this holiday season

Léa Payette has long had a strategy for holiday shopping that helps her dodge rising prices.

She keeps a running list of gift ideas and, as an avid thrifter, picks up inexpensive, eco-friendly items throughout the year. Last year, for her friend — a foodie who loves the outdoors — Payette found an Eddie Bauer picnic set in red, her favorite color.

After recent layoffs, the end of the government shutdown and rising economic uncertainty, many households are rethinking how they’ll spend their holiday dollars.

Minneapolis-based Target on Wednesday reported another sales decline for the August-through-October period, citing consumers making trade-offs heading into the holidays. A day later, Walmart said it continued to see value-seeking shoppers across all incomes, especially those with higher incomes.

“As we go into Christmas and the holidays, we think the consumer will prioritize what goes under the tree vs. what goes on the tree,” Target’s Chief Commercial Officer Rick Gomez said on a media call.

In the Twin Cities, Deloitte’s annual holiday survey found shoppers expect to spend about the same as last year — a contrast to the 10% decline projected nationally. However, higher inflation and tariff-driven prices could mean fewer goods in the basket.

Deloitte’s findings add to several surveys predicting a spending slowdown, including one from PricewaterhouseCoopers. The National Retail Federation expects sales to rise 3.7% to 4.2%, a smaller bump than last year.

Analysts say consumers are also redefining value, often looking to maximize what they get for their money.

“You’re seeing a lot more deals and offers, and even enhancements on products,” said Bruce Nustad, president of the Minnesota Retailers Association. He noted examples like book releases paired with in-store author events.

“Ultimately, the consumer wins in that scenario,” he said.

Many chains have rolled out holiday promotions at last year’s prices, or lower, to attract deal-hungry shoppers. But consumers are noticing shrinkflation — a reduction in size without a change in price.

Walmart’s advertised Thanksgiving meal now includes 15 items, down from 21 last year, and many retailers, including Target, have swapped in more private-label goods.

Patina, which has eight stores tucked into neighborhoods across the metro, has seen increased demand for all things “cozy and crafty,” including Jellycat plush toys, cookbooks and family games, said Liz Barrere, CEO of the local chain.

Those choices build on growing demand from adults for items that brought them joy during adolescence.

Target reported growth in beauty, food and beverage and hardlines, which includes popular items like trading cards, toys and electronics. The retailer has also announced exclusive product launches with Lego, Barbie and KPop Demon Hunters.

But Deloitte noted spending declines among Gen Z and millennial consumers.

That largely reflects buying power, said Allison Luedtke, associate professor and economics department chair at St. Olaf College. Those generations are earlier in their careers and more affected by inflation, tariffs and rising living costs.

Lifestyle changes, such as having children, also shape spending habits and can cause expected spending to differ from what people ultimately buy.

“Now I have two children, and I’m much less flexible in what I’m going to be spending,” Luedtke said. “I’m going to be spending what I’m spending because I have children and they don’t know how tariffs work.”

Minnesota may get a slight break on tariffs. The state is less exposed to imports — and thus tariff-driven price hikes — than some neighboring states, Luedtke said.

Still, Minnesotans face rising costs in areas where they spend heavily, including child care, housing and health insurance. Those expected increases could shape how much families spend on gifts and other holiday festivities.

“I’m always sensitive when I talk about how the economy does better in Minnesota because obviously it doesn’t do better for everybody,” said Matt Marsh, Minneapolis managing partner at Deloitte. “Lower- and middle-income people get hit harder by inflation because it eats up a greater proportion of their dollars.”

Twin Cities residents consistently spend more than regional and national averages, including on back-to-school shopping. And when national forecasts predict large jumps in spending, Minnesota often sees steadier growth.

“Part of it is the balanced nature of the economy in the Twin Cities. It’s a very diverse, entrepreneurial community. It de-risks a lot of the economy up here,” Marsh said. “Historically, we’ve always been a little higher on the spend.”

If the National Retail Federation’s holiday estimates are correct, holiday spending could surpass $1 trillion nationwide. Deloitte, even with the spending dips, estimates the total could top $1.6 trillion.

That uptick, though, could come from higher prices rather than a surge in buying, according to the S&P Global’s 2025 Holiday Retail Sales Outlook.

“When I saw that [retail federation report], I thought, yeah, that’s just a statement about how the cost of stuff goes up over time,” Luedtke said. “I don’t think that’s a statement about how people are actually buying more stuff.”

Traditional ways of predicting consumer spending aren’t always reliable, he added, noting that “you can’t necessarily even tie consumer confidence to what a consumer actually does.”