Christina Beck is proceeding with caution this holiday season as she makes lists of gifts for her family and friends and sticks to them. She is keeping her spending in check due to the high cost of food in grocery stores and restaurants, along with the mortgage for a home in Minneapolis she bought last year with her best friend.
On the other hand, her best friend, Kristin Aitchison, cannot wait for the holidays. She plans to scale back her spending, but every year, she ends up spending more than the previous year.
For many people, there are several reasons to be more cautious with their holiday spending this year. While inflation is not as rapid as it was a year ago, millions of shoppers still feel sticker shock when buying groceries. Additionally, payments on federal student loans have resumed, and higher interest rates have resulted in larger credit card bills and mortgage payments for home buyers.
While consumer spending has been strong throughout 2023, the question for retailers is whether people will continue to spend this holiday season or decide to pull back.
The National Retail Federation expects holiday sales to increase 3 to 4 percent from last year, without adjusting for inflation, on par with the prepandemic 2019 season. However, a survey by the Conference Board indicates that consumers plan to spend slightly less on holiday-related items this year compared to last year.
Amazon’s Prime Day in October showed that consumers were spending more, albeit only slightly. However, retail sales nationwide fell 0.1 percent in October from September, the first drop since March, according to the Commerce Department. Executives at Walmart also noted that consumer spending had weakened in the last two weeks of October, indicating that people seemed to be waiting for sales.
The pullback in retail sales was smaller than expected by many economists, and some analysts see it as a sign of continued consumer resilience.
Higher-income shoppers may still have plenty of extra savings, but those with lower incomes have used up more of their resources. Additionally, higher interest rates may deter shoppers from putting holiday shopping on credit cards, making it more difficult to have a large pile of presents under the tree this year.
Consumer spending has been supported by continued strength in the job market and wage gains throughout the year. However, signs of slowing are beginning to show up, with wage growth slowing and the unemployment rate rising over recent months.
The resumption of student loan payments is putting a strain on holiday spending plans for many consumers. In a holiday survey by Deloitte, 17 percent of respondents said they had to resume student loan payments, and almost half of them said they planned to reduce their holiday spending as a result.
For many people, the approach to holiday shopping involves hunting for deals, whether on Black Friday or through other pre-Christmas sales. Many consumers plan to watch for deals and special offers online or in stores this year.
Some individuals, like Christina Beck, start buying holiday gifts early and make lists of what friends and family need or like in order to budget accordingly. On the other hand, Kristin Aitchison takes a different approach, with no particular plan or budget for holiday shopping.
Despite their different holiday shopping styles, both Christina Beck and Kristin Aitchison have fun shopping together.
