US consumers are planning to increase their holiday spending in nominal terms this year, but a new survey reveals a less cheerful reality when considering the impact of inflation. The Conference Board Holiday Spending Survey indicates that the average consumer intends to spend $1,063 on holiday-related purchases in 2024. This figure represents a 7.9% rise from $985 in 2023, and is also higher than the spending in 2022 and 2021. While these numbers suggest robust consumer enthusiasm, adjusting for inflation paints a different picture, raising concerns about whether buying power is lower in 2024 compared to pre-pandemic levels.
Dana M. Peterson, Chief Economist at The Conference Board, noted, “US consumers are cheerful heading into the holiday season, as reflected in October’s strong rebound in the Consumer Confidence Index®. The Holiday Spending Survey confirms Americans’ positive outlook on gift-giving and celebrations. However, persistent high inflation over the past few years has significantly increased price levels, consequently diminishing purchasing power. When we account for inflation, planned holiday spending actually falls below pre-pandemic levels. A significant portion of consumers anticipate higher prices for both gifts and food compared to last year, which might explain why a majority plan to celebrate the holidays at home or locally, with only 31% intending to travel.”
Nominal Spending Increase Masks Real Buying Power Decline
The survey highlights a crucial distinction between nominal and real spending. While the nominal spending intention is up, when adjusted for inflation to 2017 dollar values, the planned spending for 2024 is $860. This “real spending” figure, while a 5.3% increase from 2023, is actually lower than both 2022 and 2021 levels. This stark contrast underscores the erosion of buying power. Although consumers are spending more dollars, they are getting less in return compared to previous years, particularly when considering pre-pandemic benchmarks. The data suggests that despite increased spending, the quantity and quality of goods consumers can afford this holiday season are constrained by inflation, indicating that buying power is indeed lower in 2024 compared to the pre-pandemic era.
Inflation Expectations Remain High for Gifts and Food
Consumer expectations about rising prices further reinforce concerns about diminished buying power. Approximately half of the surveyed consumers anticipate paying more for both gifts and food this year compared to last year. While this percentage is slightly lower than in 2023, it still represents a significant portion of consumers bracing for higher costs. This expectation of increased expenses directly impacts how far their holiday budget can stretch, effectively reducing their real buying power.
Spending Patterns Vary Across Age and Income Groups
The survey reveals diverging spending patterns across different demographic groups. Younger consumers (under 55) and wealthier households (earning over $75K) are more inclined to increase their gift spending this year. Conversely, older consumers (over 55) and those with lower incomes (under $75K) are planning to reduce their spending on both gifts and non-gift items. This disparity highlights the uneven impact of inflation, with more vulnerable groups feeling the squeeze on their buying power more acutely and adjusting their holiday budgets accordingly.
Online Shopping Moderates While Travel and Gift Cards Gain Favor
Interestingly, the surge in online holiday shopping seen during the pandemic is showing signs of moderation. While online shopping remains prevalent, the percentage of consumers expecting to make most of their purchases online has slightly decreased, nearing pre-pandemic levels. In terms of gift preferences, consumers are showing increased interest in experiences and practical gifts. Vacation and travel, along with gift cards, and toys and games are gaining popularity as gift choices, while categories like books/music/DVDs, beauty products, and home decor are less favored.
Holiday Celebrations Remain Closer to Home
Consistent with concerns about budgets and potentially driven by higher travel costs, a significant majority of consumers (69%) are planning to stay home or near home for the holidays. This trend further suggests a cautious approach to spending and potentially reflects the impact of reduced buying power, influencing holiday celebration plans to be more localized and less travel-intensive.
Conclusion: Inflation Dampens Holiday Cheer and Buying Power
In conclusion, while US consumers express a willingness to spend more nominally this holiday season, the stark reality is that inflation significantly diminishes their buying power. Adjusted for inflation, planned holiday spending remains below pre-pandemic levels, confirming that despite increased dollar amounts, consumers can afford less. Rising prices for essential holiday items like gifts and food, coupled with cautious spending patterns across certain demographics and a preference for staying closer to home, all point to a holiday season where inflation casts a shadow on consumer cheer and significantly reduces buying power compared to the pre-pandemic era. Consumers are spending, but their dollars simply aren’t going as far.
