A recent Nielsen survey of 21,000 U.S. households found that 35% plan to spend less this year than they did in 2007.  Just 6% will spend more this year, while 50% say they’ll maintain the same level of spending from 2007.

Lower-income households reported large reductions in their holiday spending — but so did high income households.  In all, 37% of lower-income households are expected to cut back on holiday spending, as will 34% of higher income households.

What’s Hot?

Necessities — rather than novelties and luxuries — are expected to drive holiday sales this year, according to Nielsen’s research.

Toiletries, baby care products, food items, and gift cards for groceries, gasoline, telephone, and car maintenance are expected to see strong sales.

Practical, cold-weather apparel — socks, fleece jackets, and undergarments — and household goods, like cook books, bed/bath linens, and kitchen supplies are also expected to sell well in November and December. 

Among more affluent consumers, fireplace accessories, kitchen ware, family games, and other at-home entertainments will dominate sales. 

As in past years, DVDs, video games, mobile phones, books, and wines and spirits are also expected to generate a fair share of holiday sales. 

Although many consumers are curtailing their spending on out-of-home food, alcohol, and entertainment, sales of movie tickets, which remain an affordable luxury, are expected to stay strong in November and December.

What’s Not?Department stores and retailers of electronics, toys, home improvement supplies, and office supplies are likely to feel the brunt of the economic slowdown as consumers shift their purchases to more value-oriented retailers.   

Where’s the Action?Online retailers, dollar stores, grocery stores, supercenters, mass merchandisers, and club stores are expected to attract the lion’s share of holiday spending, as consumers seek to minimize the number of shopping trips they make — and find good values.

View in depth Nielsen data on consumer holiday spending projections.

Read Nielsen’s holiday sales forecast.

Go behind the numbers: read NielsenWire’s Q&A with James Russo, co-author of Nielsen’s holiday retail forecast.

Read coverage of Nielsen’s findings in Adweek, Media Post, Promo, and the Rocky Mountain News.

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.

Noting that trend, the Chicago Tribune recently offered tips for selecting good but inexpensive wines. 

“With the economy nose-diving and costs rising, what we all really need is a good, cheap, drink,” Bill Daley, the Tribune’s food and wine critic, wrote Wednesday.

More than 40% of bar managers, bar owners, and bartenders surveyed in May report they have seen a decrease in consumer traffic, while 25% note a decrease in the number of drinks ordered and 22% say that customers are ordering less expensive drinks. 

Establishments on the East and West coasts report the greatest declines, with owners and operators in California and Florida citing significant decreases in consumer traffic — 55% and 52%, respectively.

“A growing number of consumers are simply opting to stay home more often rather than go out for dinner or drinks,” Danny Brager, vice president, Client Service, Beverage Alcohol, Nielsen, noted.  “As a result, sales of alcoholic beverage purchases at restaurants, bars and nightclubs are suffering as consumers seek ways to economize.”

View the full press release.

The story noted that sales of other consumer-discretionary products have been hurt by the poor economic conditions, but alcohol sales are proving to be resilient.  “Beverage alcohol continues to be pretty recession-resistant,” Richard Hurst, of AC Nielsen, told BusinessWeek.

In May, spirit sales rose by 5.4% on a dollar basis and 3.6% on a volume basis, according to Nielsen. 

A recent Nielsen study provides in-depth analysis of current trends in alcoholic beverage purchases.