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  • Writer's pictureAntonise De Wet

The influence of inflation on holiday spending

How Americans shop is evolving due to inflation. Despite the fact that Thanksgiving weekend is one of the busiest shopping weekends of the year, consumer spending was strong, rising inflation means that consumers are receiving less for their money, according to experts. As inflation continues to squeeze our budgets, the price to decorate the holidays is only rising, according to Your Girl Knows smart-shopping expert Harman Awal. Many of us are being forced to be resourceful with our holiday shopping and spending, whether it's choosing a fake tree over a real one or forgoing a lengthy family vacation in favor of a staycation at home. Many people are selecting homemade gifts or inexpensive products as they tighten their budgets for gift-giving.


What impact does inflation have on holiday shopping?

According to Gonzalez, as gas and power prices rise, more expensive manufacturing and transportation have resulted in increased pricing across the board. However, not every category has experienced a price increase at the same rate. Gonzalez noted that while the cost of furniture and equipment has increased by 10% to 15%, the cost of clothing has only gone up by roughly 5%. According to Jonathan Wright, an economics professor at Johns Hopkins University, consumers are inclined to choose less expensive alternatives over more expensive ones because certain costs have not climbed as much or have decreased.



Shopping Isn't the Only Thing Under Pressure from Inflation

This holiday season, gifts and decorations are not suddenly more expensive than previous. Since mid-2021, when inflation began to rise at an unusually rapid rate, people have witnessed a decline in their purchasing power. According to the most current Consumer Price Index (CPI), prices have increased by 8.2% across all significant categories since last year. The Barbie doll, drone, or Lego set that holiday buyers were hoping to purchase now costs 8% more than it did last Christmas, so they aren't feeling the pinch. Food costs have increased by 10.9%, and energy costs have increased by a staggering 17.6%, according to the same CPI data. Inflation has also had an impact on online buying. The greatest increase since Adobe started monitoring the digital economy in 2014, 3.5% year-over-year, was reported as the online inflation rate for November by Adobe on Thursday. Additionally, it's been 18 months in a row with online inflation.


Travelers are cutting back and booking flights on the unfavorable days

NPR reports that demand for Christmas travel is very high, despite some individuals choosing staycations over the customary holiday trip. According to CNBC, due to a combination of high demand and constrained supply, airfare will be more expensive than it has been in the previous five years. This year's holiday travel is expected to cost more than in previous ones, according to Gramuglia. As an alternative, consumers can choose to travel on holidays like Thanksgiving Day or Christmas Day or stay closer to home to save money.


Smart consumers aren't just making cuts; they're also taking action.

Even though times are difficult, the nation is not yet giving up. Despite the odds being stacked against them, shoppers are ingeniously stretching their funds, using their techniques, and pulling off a holiday season for the ages.


In terms of their Christmas shopping, consumers are "getting inventive this year," according to Melanie Edwards, senior e-commerce and digital product manager for OLIPOP. "They are taking advantage of early holiday sales, reward stacking, and shopping in volume. Many people use incentives from their credit card providers and through their web browsers.


Do we expect these evolving consumer tendencies to continue into 2023?

We believe that if inflation stays high, the behavior we're witnessing now and throughout the holidays may not be representative of what we'll see in the future. We might observe that people are starting to make a long-term trade-off between doing things now and having to tighten their belts more at the start of next year. People do have a tendency to splurge during the holidays and to put things on their credit cards — things they don't tend to do otherwise. We believe that the economic statistics show that we are experiencing a recession in slow motion. Things are happening, but everything is responding slowly.

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