How holiday spending plans could reflect a divided ‘K-shaped’ economy

Holiday shopping amid inflation and tariffs means many Canadians expect to take on more debt in what one retail analyst says demonstrates growing concerns about a “K-shaped” economy.

A newly released Harris Poll survey, conducted on behalf of NerdWallet Canada, asked about 1,000 adult Canadians in October about their holiday spending plans.

The report found Canadians plan to spend an average of $708 on holiday gifts, which is up slightly from $698 last year.

Twenty-six per cent of shoppers said they plan on spending over $1,000, while 46 per cent plan to spend less than $500, and 15 per cent said it’s less than $100.

“This year’s modest bump in average spending likely reflects a small but influential group of big spenders,” the survey says.

“The reality for a larger portion of Canadian gift-givers is a tighter budget.”

This also comes as experts have described a “K-shaped” income and spending divide over recent months, where higher-earning households continue or increase their spending while lower-income households dial back their budgets under pressure from factors like inflation.

“Some people have done really well over the last five years, maybe because they’ve had money in the stock market or they’ve gotten promotions at work. Then there’s some people who may be have had a much harder time over the last five years because inflation has crept up, and their wages feel stagnant,” says retail analyst Bruce Winder.

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Bruce adds that this divergence among consumer shopping habits creates a “K-shape” pattern — especially during the holidays.

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“So the ‘K-shape’ really refers to the growth of luxury spending and the growth of value spending on the bottom but that middle sort of spending is missing now.”

This means higher-income households are less inhibited from spending and may look to higher-priced luxury items, while there are more value-focused shoppers at the bottom of the income scale.

Data from Statistics Canada shows the income gap widened to a “record high” earlier in 2025, which reflects the growing divide between higher-income and lower-income households in Canada.

At the same time, the survey found more than a quarter of respondents, or 28 per cent, said they are still paying off debt from last year’s holiday shopping season, including 30 per cent of millennials, 27 per cent of Gen X and 19 per cent of Baby Boomers.

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For Gen Z Canadians, 22 per cent said they will need to dip into emergency savings to buy holiday gifts this year, compared to five per cent of Baby Boomers.

To help reduce the impact of high prices on people’s wallets, 36 per cent of NerdWallet Canada survey respondents said they were only buying gifts on sale, 35 per cent said they will spend less per person this year compared to previous years, and 32 per cent said they are giving gifts to fewer people this year.

Earlier in November, the Bank of Montreal released a similar survey showing 61 per cent of respondents planned to adjust their holiday spending strategies due to tariffs, and 41 per cent said they were trimming their gift giving budgets.

These “cautious” consumer sentiments were also echoed by the Bank of Canada in its summary following the latest rate cut announcement.

– With files from Global’s Anne Gaviola