Recent reports show four years of high inflation putting an extra chill into the Christmas season as rising prices push consumer spending to new peaks.
In a survey that the credit reporting firm Experian shared with The Washington Times, 68% of U.S. consumers said inflation would affect their holiday shopping plans, with 43% planning to tighten their belts. Others said they planned to open new credit cards or retail cards to take advantage of cash back, retail store rewards and travel discounts.
An additional 63% told the consumer research firm they typically spend too much during the Yuletide season, and 33% felt stressed about this year’s purchases. Most cited deals and sales as coaxing them to overspend on eating and unnecessary gifts.
Christina Roman, Experian’s consumer education and advocacy manager, said the findings make it imperative for families to budget wisely and put the brakes on unnecessary spending this year.
“The holidays are a time of year where we naturally want to spend more time with family and friends and treat them to thoughtful gifts,” Ms. Roman said in an email. “However, consumers should not let the fun of the season make them lose sight of their financial means and their goals.”
The findings come as U.S. credit card debt and holiday spending hit records.
U.S. consumer debt has reached an all-time high of over $17 trillion. In the Experian survey, 46% of the 1,002 shoppers surveyed said they planned to charge holiday expenses this year, adding to that total.
The National Retail Federation recently estimated that consumer spending at Christmastime will reach a record average of $902 per person this year, driven by expenditures for family gifts and not adjusted for inflation. That’s $25 more than last year and $16 higher than the previous high set in 2019 before the pandemic.
Robert Gmeiner, an economist teaching at Methodist University in North Carolina, said this annual increase of less than 3% in holiday retail spending confirms that the 2.4% consumer inflation rate is responsible for the extra $25 each American will pay for the holidays.
“Americans are spending more money for less stuff,” Mr. Gmeiner said. “I imagine people are reducing how many Christmas gifts they buy, but not materially changing the dollars they spend.”
He noted that adults whose salaries haven’t changed since President Biden took office in January 2021 have lost nearly a fifth of their real incomes, which means they’re “getting almost 20% less stuff” for the same amount of money.
According to the Bureau of Labor Statistics, consumer prices have climbed by a cumulative 20.8% since the pandemic.
“Currently, prices are not increasing as quickly as in the past few years, but prices are still higher than what the consumer was used to paying,” said Tom Arnold, a finance professor at the University of Richmond. “Further, this higher level of prices is going to stay.”
According to industry analysts, consumers have leaned hard into charging purchases and cutting other expenses to prioritize their Christmas wish lists.
“Before the pandemic, inflation was practically nonexistent, having fallen to 0.1% in May 2020,” said Sean Higgins, an analyst at the libertarian Competitive Enterprise Institute. “Once in office, the Biden administration fed staggering amounts of government financial stimulus into the economy, sparking inflation, which peaked at 9.1% in June 2022.”
Global supply chain disruptions, harsh weather, rising production costs and wars in the Middle East and Ukraine have bulged prices of holiday food and gifts.
Edgar Dworsky, founder of the website Consumer World, which has tracked inflation in consumer prices since 1995, said big-screen TV prices have returned to their prices of four years ago. But he said other household items cost much more.
“The price of major appliances has gone up substantially,” Mr. Dworsksy said. “Where years ago you could count on seeing a 25-cubic-foot French door refrigerator on sale on Black Friday for $999, in recent times this has been a rarity or even nonexistent.”
Another factor driving up holiday prices is a spike in violent retail crimes, including organized smash-and-grab robberies, that began during pandemic lockdowns.
According to Capital One Shopping, retail theft grew nearly 20% in 2022 and 9% in 2023. It’s projected to pass $150 billion by 2026.
“When property rights are routinely violated due to looting and attacks on customers, the ripple effects go far beyond store aisles,” said Michael Austin, a former economic adviser to two Kansas governors and economist with the National Center for Public Policy Research’s Project 21.
Nikki McDonald, a financial adviser at Northwestern Mutual, said it’s essential for families to pay their bills before spending what’s left over on Santa Claus.
“To avoid going overboard during inflationary times, start by listing out essential expenses, like housing, food and debt repayment, then see what’s left for holiday spending,” Ms. McDonald said.
• Sean Salai can be reached at ssalai@washingtontimes.com.
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