Inflation has been a massive downer for all 2022. It's managed to creep into almost every aspect of our lives and sink its claws deep. Food, gas prices, and interest rates are all critical areas that were hit particularly hard by inflation. Gas prices are only recently coming down from their high in June, and food is still more expensive than it should be.
With the Fed hiking interest rates to combat inflation, anyone who has debt with a variable interest rate has likely seen spikes in the amounts they owe. Surprisingly, though, inflation has not managed to put a damper on Americans' Christmas spirit.
Holiday spending is high this year, with people shelling out hundreds of dollars on gifts and thousands on travel. Gallup analyzed Americans' Christmas spending over the last few years compared to this year to see how, if at all, inflation has affected Christmas shopping plans this year.
The Spirit of Christmas Is Alive and Well
Gallup reported that the amount of money Americans plan to spend on Christmas gifts this year is the highest recorded in three years. American adults Gallup polled between October 3-20 said they plan to spend an average of $932 on gifts this year.
Last October, the average amount spent on gifts was $837; in 2020, the average was $807. October 2019 saw a spike at $942, the highest point since 2006, but it still falls short of this year's average.
Gallup theorizes that Americans could be making more room in their budgets for holiday spending because they are attempting to prepare for higher prices of goods due to inflation. Clothing, toys, and electronics have all been affected in the last year, and Americans are having to adjust.
The high spending intentions bode well for retail stores struggling with price hikes over the past year.
All Budgets Are Welcome
The average amount Americans are planning to spend this holiday season is not limited to one tax bracket. 37% of adults plan to spend $1,000 or more, 30% plan to spend somewhere between $250 and $999, and 17% are pulling it in this year and spending less than $250.
The increased average amount can be attributed to more Americans reporting that they plan to spend $1000 or more. Last year, that percentage was only 33%. There are also fewer individuals who plan to spend no money at all due to financial hardship. 8% of respondents said they would not be spending any money on gifts this year, compared to 11% last Christmas.
The Spending Guilt Is Real
Gallup asked Americans whether or not the amount they will be spending on Christmas gifts this year will be the same, more, or less than last year. Since 1996, Americans have routinely reported in this poll that they will be spending around the same as the previous year. Few, if any, respondents say they will be spending more.
Although the average spending amount hit a record high this year, Americans still hesitate to report how their holiday spending will differ from the previous year. 17% said they would spend more on gifts this year than last, 26% said they would spend less, and 55% said they would spend around the same.
The results of this question don't differ significantly from the October 2020 and 2021 results, but they are slightly more conservative than those from 2017-19. In these two years, the proportion of adults who reported spending more and the proportion of those who spent less were more or less balanced.
How Spending Estimates Correlate With Sales
Although the average amount Americans intend to spend on gifts is not a guarantee of how much retailers will make in sales, it's usually a pretty good indicator. In the last decade or so, every time Americans have reported that their spending estimates are lower, sales dip that year. Same with spending more. When Americans report higher spending estimates, retail sales reflect that.
Last year, Americans reported that they planned to spend around $837 on average. However, due to concerns about supply chain disruptions and rising inflation, shoppers may have taken the initiative and done their shopping earlier in the year. Gallup attributed the increase in spending in 2021 to a few factors.
At the time, consumers were on solid financial footing, and unemployment was low. Consumers would have been more comfortable spending more money when they had a sturdy safety net underneath them.
Due to consumers' increased financial confidence, November and December 2021 retail sales rose to 14.1%, an unusual high. This year is also looking like another high-spending year despite concerns over inflation. According to the U.S. Census Bureau, U.S. retail and food services are up 8.3% from October 2021.
Consumer spending can also fluctuate as the season progresses. Changes in the economy, such as gas prices and major news events, can significantly impact consumers' spending habits. As of right now, it is looking like American retailers will be benefiting from Americans' higher-than-normal spending intentions, even if it falls short of last year's holiday spending boom.