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In 2025, Generation Z is cutting back sharply on holiday spending, reducing their budgets by about 23%, according to new reports. This shift is largely due to ongoing inflation, higher interest rates, and global economic uncertainty. Instead of buying traditional gifts, many Gen Z consumers are choosing to spend on experiences like travel, dining, and events. Experts say this move reflects a desire for more meaningful and memorable purchases, especially after living through recent financial and social disruptions. Overall, U.S. holiday spending is expected to drop by 5%, showing how economic stress is changing how people, especially younger ones, manage their money.

In 2025, the U.S. economy is facing a tough situation. Prices continue to rise faster than expected, with inflation staying at 2.7%, which is higher than the Federal Reserve's target of 2%. This means that everyday items like food and household goods cost much more than they did before the pandemic—over 24% more, according to Bankrate. While some central banks around the world have started cutting interest rates to help boost slow economic growth, the Federal Reserve is being cautious. They're worried that lowering rates too soon could make inflation even worse, so for now, they're holding off. As a result, American families are feeling squeezed as their wages and savings struggle to keep up with rising costs.

Economist Torsten Slok warns that the U.S. might face a new wave of inflation in the near future, calling it an “inflation mountain.” This second rise in prices could be caused by long-lasting issues like higher tariffs and limits on immigration, which may keep costs up for goods and services. Slok says Federal Reserve Chairman Jerome Powell is worried that the job market is acting in unusual ways, making it harder to control inflation. With pressure growing to lower interest rates, Slok warns that the Fed might act too soon—just like in the 1970s—leading to both high inflation and a possible recession. Right now, prices are still going up, though not as quickly, but the risk of inflation getting worse again remains a concern.

UBS, a major global financial firm, is warning that the U.S. economy is very likely heading toward a recession, giving it a 93% chance based on recent data. They looked at several economic indicators from May through July, such as an inverted yield curve (a sign that investors are worried about the future), growing stress in the credit market, and signs of weakness in the job market. UBS describes the situation as widespread but not yet severe—more like a slow decline than a dramatic crash. Even though the economy isn’t collapsing, ongoing inflation, especially shown by rising prices in the PCE index, adds more pressure to already uneasy conditions.

In today’s uncertain economy, Gen Z and millennials are changing how they spend money by focusing more on health and wellness. Even though overall retail sales are growing slower than expected, spending at gyms and fitness centers has gone up by 7% in the past year—one of the biggest increases seen recently. This shows that younger people are choosing to spend their money on things like fitness, mental health, and self-care instead of traditional consumer goods like clothes or gadgets. They care more about living healthy lifestyles and supporting brands that match their personal values, even during tough financial times.

In 2025, many people in the U.S. and other wealthy countries are changing how they spend their money because of inflation, high living costs, and global uncertainty. Shoppers are now focusing more on buying basic needs instead of luxury items or name brands. For example, more people are buying store-brand grocery products because they’re cheaper and offer better value. At the same time, fancy brands are seeing fewer customers, with a 2% drop in global luxury sales this year. In response, these companies are investing in new shopping experiences to attract buyers. This shift in spending shows how rising rent, material costs, and economic challenges are pushing people—especially younger generations—to make smarter, more thoughtful money choices.