How Inflation Is Affecting Holiday Gift Spending This Year
Fewer gifts, scaled-back travel, smaller parties and tighter budgets are the themes of the 2022 holiday season — and everyone knows why.
“The cost to deck the halls is only going up as inflation continues to pinch our wallets,” said smart-shopping expert Harman Awal of Your Girl Knows. “Many of us are finding ourselves forced to get creative with holiday shopping and spending, whether it’s opting for a fake tree rather than the real deal or skipping out on a big family vacation in favor of staycationing at home. Many are tightening their belts when it comes to gift giving, choosing homemade presents or ones that won’t break the bank.”
A new GOBankingRates survey of more than 1,000 American adults backs up those sentiments. In 2022, the season of giving has become the season of giving cautiously and selectively.
It’s Not Just Shopping; Inflation Squeezes From Every Direction
Presents and decorations aren’t suddenly more expensive this winter than last. Inflation started rising at an abnormally high pace in mid-2021, and consumers have been watching their purchasing power shrink for more than a year.
The most recent Consumer Price Index (CPI) shows that prices are up 8.2% across all major categories year over year. But holiday shoppers aren’t feeling the squeeze because the Barbie doll or drone or Lego set they were planning on buying costs 8% more than it did last Christmas.
The same CPI report shows that food costs have risen by 10.9% and energy costs are up by a whopping 17.6%.
The end result is that people who are already struggling to put food on the table and going into debt to heat their homes now also have to dig deeper to pay for the Barbie dolls and Legos.
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About one in three people who responded to the GOBankingRates study plan to spend less this year than they did last year — presumably because, after a year of high inflation, they simply have less money to spend. Interestingly, roughly the same percentage — 30% — plan to spend more this year. Here, too, the reason is probably simple: They don’t have any choice because everything is more expensive.
Almost half will follow a strict budget, one in three will buy fewer gifts, 16% are canceling their travel plans, 32% will shop only during sales and one-quarter will charge the holidays on their credit cards.
Retailers are well aware that the average household has to make every dollar count this year. In response, they launched their holiday sales before Halloween to make sure their competitors didn’t beat them to the punch — and shoppers have jumped at the opportunity.
“Because of inflation, consumers are expecting to spend more overall this holiday season — and buying earlier than ever,” said Rebecca Gramuglia, consumer expert at TopCashback. “And it’s not just consumers. Retailers have already started their holiday sales, highlighting an emerging trend of early-bird holiday shopping. When shoppers see a good deal and it fits their budgeting plan, they should go for it.”
While some people are forsaking the traditional holiday trip in favor of staycations, demand for holiday travel is very strong, according to NPR. That high demand, along with limited capacity, will make airfare more expensive than it has been in five years, CNBC reports.
“Traveling for the holidays this year is shaping up to be more expensive than in recent years,” Gramuglia said. “As an alternative, consumers can opt to stay closer to home or travel on holidays — Thanksgiving Day, Christmas Day, etc. — in order to cut costs.”
Faced with the unpleasant prospect of spending more money for fewer presents, many shoppers are prioritizing the people closest to them and cutting out those beyond their immediate circle of loved ones.
“Many consumers are planning to spend more money this holiday season, although shoppers will be purchasing fewer gifts due to rising costs,” said Erica Seppala, retail analyst with MerchantMaverick.com. “Consumers who purchased gifts for extended family, friends and co-workers in years past may be skipping these purchases and instead may focus on making purchases for immediate family and close friends. More shoppers will be shopping at discount stores or hitting up sales to save money on their gifts this year.”
Smart Shoppers Aren’t Just Cutting Back; They’re Fighting Back
Times are tough indeed, but the country isn’t throwing in the towel just yet. Shoppers are finding clever ways to stretch their dollars, work their strategies and pull off a holiday season for the ages despite the odds being stacked against them.
“Consumers are getting creative this year when it comes to their holiday spending,” said Melanie Edwards, senior e-commerce and digital product manager for OLIPOP. “They’re taking advantage of rewards stacking, early holiday deals and buying in bulk. Many are utilizing rewards through their credit card companies, as well as their internet browsers.
“Stores are promoting amazing deals well before Black Friday that shoppers are jumping on. And lastly, people are purchasing large gift sets and then divvying up the contents among multiple people on their list to save money. These methods are helping the average consumer beat inflation this holiday season.”
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