Kelly Bergl traditionally has gone on spending sprees for the holidays, a ritual that was turbocharged by the pandemic.

She would buy chocolate from Harrod’s in London, lots of stocking stuffers for her two young children, tickets to holiday events and decorations for the house.

“We had a bigger budget and more time during the pandemic,” says Bergl, 40, of San Francisco, noting that she and her husband had saved money from not going out or traveling, and had more time because they worked from home.

Now, they’re back in the office and taking extended business trips, and their COVID-related savings have dwindled. “I have less time to even think about” such purchases, she says.

Meanwhile, they’re being pinched by inflation. Grocery shopping for the family costs about $300 a week, compared to less than $200 before the crisis.

So instead of buying a gift for each of about 20 extended family members as usual, each person is buying one gift that will be randomly chosen by a relative in a Secret Santa game.

“I’m finding it easier to only focus on what we absolutely need vs. the nice-to-haves,” she says.

Is consumer spending up or down?

Americans are turning more cautious ahead of the critical holiday shopping season as they grapple with high prices, dwindling savings and rising debt. Although shoppers are still spending, they’re focused more on essentials and making fewer discretionary purchases, according to Circana, a firm that researches consumer behavior.

“They’re saying, ‘I can’t keep spending like this,” says Marshal Cohen, Circana’s chief retail industry advisor.

That, he says, could make for a more challenging holiday sales season, which officially kicks off this week with Black Friday and makes up about one-quarter of annual sales for some retailers. Cohen estimates seasonal sales will be flat or down slightly this year.

General merchandise sales – meaning discretionary items such as clothing, TVs, computers, appliances and furniture – fell 7% in October from a year earlier, its worst performance since March 2022, Circana data shows.

Sales of necessities such as food, beverages and consumer packaged goods like paper towels, garbage bags, and tin foil also have pulled back but are still up 1% annually.

Broadly, retail sales dipped 0.1% last month after surging over the summer, according to the Census Bureau. Consumer sentiment fell for the fourth straight month in November to its lowest reading since May, according to a University of Michigan survey.

Is a recession coming?

Since consumption accounts for about 70% of economic activity, a wobbly consumer could raise the odds of a recession in the months ahead. LinkedIn says the number of seasonal job postings on its site from July to October was down by half from last year.

Jack Kleinhenz, chief economist of the National Retail Federation, disagrees that shoppers will be stressed this holiday season.

“The average household remains on relatively solid financial footing despite pressures from still high inflation, stringent credit conditions and elevated interest rates,” he says.

His group predicts holiday sales will rise 3% to 4%, less than the past two years but in line with the average from 2010 to 2019.

Cohen acknowledges that households are still benefitting from job and wage growth that has slowed but remained solid.

“People don’t have fear of losing their jobs,” he says.

How much does the US have in excess household savings?

But while inflation has eased, it’s taking a bigger toll on some household budgets as pandemic-related savings wear thin, Cohen says. Nationally, total cash reserves amassed from federal stimulus checks and hunkering down during the health crisis have fallen to $1.75 trillion from a peak of $2.7 trillion, according to Mark Zandi, chief economist of Moody’s Analytics.

Kleinhenz notes, however, that recent government revisions show Americans haven’t drawn down their COVID savings as sharply as believed several months ago.

Still, Ian Shepherdson, chief economist of Pantheon Macroeconomics, estimates the cash cushion is down to about $1.3 trillion and that’s mostly in the hands of the wealthy, with low- and middle-income Americans having depleted most of their trove.

Americans, in turn, are borrowing more.

How bad is credit card debt right now?

Credit card debt shot up by $154 billion in the third quarter, the biggest jump on records dating to 1999, according to the Federal Reserve Bank of New York. And about 8% of credit card balances are at least 30 days past due, the most since the early part of the 2010s following the Great Recession.

During that downturn, layoffs were widespread and consumers made radical changes, shifting their shopping from department stores like Macy’s to discount stores like Walmart and Dollar General, Cohen says.

Now, they’re making more subtle tweaks but those still could curb holiday sales. As much as one-quarter of seasonal sales are from impulse purchases, Cohen says, such as buying a hat or shoes for yourself because of an inviting display you see while buying a gift. But just 23% of holiday shoppers plan to make such impulse purchases this year, down from 28% in 2022, Circana data shows.

And after spending binges during COVID lockdowns, there isn’t all that much consumers still crave, Cohen says. Instead, they’re seeking value in the discretionary purchases they do make, he says.

“You don’t need another TV,” Cohen says. “The technology in the phone is still the same.”

“The motivation to buy is really, ‘Is this going to add value to my life?’” Christina Hennington, Target’s chief growth officer, said on a recent earnings call, according to a Seeking Alpha transcript. “Is this something that is intriguing and feels relevant or is fashion forward, or is (it) really for me?”

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The past few years, Mary von Tobel, of O’Fallon, Illinois, has bought a new cellphone, an Apple computer and a reconditioned sewing machine.

Now, she and her husband are mostly confining their purchases to essentials and buying small holiday gifts. They want to downsize ahead of a planned move to Indiana in January but also no longer feel the need to splurge.

“Pretty much everything we need, we have,” says von Tobel, 69.