According to the annual study, 11.5 percent of Americans won’t be spending anything on presents, gift cards, or any other items for entertaining. This is the highest percentage for the category since the company began tracking consumers’ holiday habits.
What’s driving Americans to become Scrooge? The top concern for consumers, investors, and voters today is inflation.
Thirty-nine percent of consumers who may spend more this year attribute this to higher prices in general, according to the survey. Half of the consumers who say they'll spend less this year attribute it to higher food costs.
The survey also highlights a “tale of two holidays,” with a substantial gap in shopping plans between high- and low-income groups. The holiday retail report found that U.S. households earning an annual income of $100,000 or more will spend $2,624 this Christmas, up by 15 percent. Households making less than $50,000 per year will shell out $536, a 22 percent drop from 2020.
“This tale of two holidays is a pretty good reflection of the tale of two pandemics, right? What starts off as a health crisis turns into a financial crisis if you’re in the lower-income [bracket],” said Stephen Rogers, executive director of Deloitte’s consumer industry division.
“Those of us who have investments in 401ks did quite well. You can see from 2019 to 2021, the lower-income group is spending almost half of what they used to spend. And the higher income group is almost double what they used to spend two years ago.”
Everything is set to become more expensive this Christmas season, from food to trees to energy. These conditions could create a financially difficult Christmas for many families, with the Salvation Army preparing for an influx of demand comparable to that of the Great Recession more than a decade ago.
Christmas Will Be More Expensive This Year
The U.S. Department of Agriculture (USDA) has shown in a recent report (pdf) that the price of live Christmas trees has nearly doubled since 2015. For example, the average Tannenbaum will be sold for much as 30 percent more.“Comparing 2019 data is a better gauge of the impacts of inflation, before the pandemic’s effects took hold of the global economy. We are trying to normalize the comparison by excluding a once-in-a-century pandemic that had an outsized impact on last year’s data,” Amanda Agati, chief investment officer for PNC Asset Management Group, said in a statement.
But this is the norm throughout the marketplace, as many experts predict that this will be the most expensive Christmas in the past 30 years. The higher prices have been driven by the intensifying global supply chain crisis and strong and simultaneous international demand with output and inventories failing to keep up.
Will Shopping Send Prices Higher?
The National Retail Federation (NRF), the industry’s largest trade organization, is projecting that sales will advance by as much as 10.5 percent year-over-year to a record $859 billion.
However, as shipping delays affect companies trying to satisfy the heightened demand, prices will rise in response to the supply and demand imbalance. Financial experts assert that these businesses are confident that shoppers can absorb these higher prices because they’re willing to pay a premium.
Analysts do note that if price inflation remains stubbornly high for a longer period, consumers and even retailers will search for alternatives.
“If inflation persists at a high level and that is stronger than wage growth, that would cause consumers to be more cautious with their spending,” Faucher said. “They have to eat out less and go to the movies less. Instead of buying steak, they’re going to buy ground beef.”
From Goldman Sachs to former Treasury Secretary Larry Summers, the consensus is that inflation will get worse before it gets better. Whether this will dampen holiday spirits will be shown in the U.S. Census Bureau’s monthly retail sales data.
