The financial services agency predicts spending will grow by a modest two per cent over last year — but the growth is due to higher prices while inflation is also up by two per cent. That will stretch shopping budgets, giving consumers less gift for their buck.
On average, Canadians will spend $1,080, although that figure was skewed upward by big spenders in Calgary and Toronto.
Half of Canadians surveyed said they will stick to a budget, with the median being around $477. Those earning less than $30,000 reported a median budget of $264 while those households with an income greater than $150,000 reported a median budget of $816.
It is the first year Deloitte has asked specific spending level questions in its annual survey, so there is no year-ago comparison.
While survey respondents said their highest priority is to pay off lingering bills, as household debt-to-income ratios continue to rise, that goal can be obscured during the holidays as festive sentiment encourages further spending, said Jean-Philippe Vorsanger, a retail consultant with Deloitte Canada.
"People's horizon is always short-term, people know in the back of their mind that things may go bad — but it's Christmas," he said Tuesday after the survey's release.
"They get in the spirit of the moment and they spend money."
Those who have trouble reining in their holiday shopping budgets risk a tough financial lesson once the holiday season ends and the bills start to arrive, Vorsanger said.
Government officials have been warning Canadians about piling on too much debt during this low interest rate climate because it could become too burdensome to pay back when interest rates inevitably rise.
The latest jobs report — showing a surprising 54,000 jobs lost in October — stock market volatility, the pressure of a high loonie and rising food and fuel prices have taken their toll on consumer confidence, said Vorsanger.
Only 29 per cent of respondents in the Deloitte survey said they expect the economy to improve in the coming year, while 33 per cent thought it will decline, the report found.
Last year, nearly half — 49 per cent — of Canadians were optimistic about the economy for the coming year and 15 per cent had a negative outlook.
Deloitte noted that its consumer confidence index has dropped to 75 from 89 last year — though Canadians are still more optimistic that shoppers south of the border, where the confidence index hovers around 45.
But Vorsanger said while the predictions aren't optimistic, at least they're not negative, as they were during the Christmas of 2008.
That Christmas, Canada had officially entered a recession and there were huge job losses and holiday sales were down 1.5 per cent.
"When people are unemployed they just don't spend money," said Vorsanger.
"As long as employment is at a reasonable level or going up, you can see flat or a small growth in retail. It's when employment goes down in very large numbers, like it did in 2008, that you start seeing negative growth."
The findings are in line with two earlier surveys.
A report by OTX and Google released last Tuesday found Canadians plan to be more frugal this year. The average amount Canadians said they planned to spend this year was $711, down from $728 last holiday season.
And a Bank of Montreal study predicted in October that Canadian retail sales will be up about 2.5 per cent in November and December, compared with a gain of 3.1 per cent in last year's holiday season.
The BMO study also noted that retail sales will be restrained by high household debt, modest wage growth and turbulent global markets.
Meanwhile, retailers, who are also feeling the pinch of a slowing economy, anticipate slow sales and have cut back inventory accordingly, Vorsanger said.
That means stores are unlikely to hold big sales and deep discounts to attract customers, he said.
"I don't think retailers are out there making splashes with big promotions early in the season — they will wait."
Electronic spending will be a key driver of holiday sales, with that category expected to increase 10 per cent from last year when there was a lack of hot tech items on the market.
This year, as competition ramps up in the tablet computing market, price wars are also heating up, which could drive sales.