Just as the holiday shopping season is about to get underway, consumers are starting to experience increasing financial strain.
After consulting with their kids, Qualyn Margain made the decision to forego Thanksgiving this year.
Margain, a life insurance agent and barista from Seattle, told NBC News that their family will be able to celebrate Christmas and the children’s birthdays, which coincide with the end-of-year holidays, more comfortably thanks to the money they save by forgoing Thanksgiving dinner.
This year, issues like growing rents and increased food costs made celebrating every holiday unfeasible. They also mentioned that this season will have a little less toys and more necessities.
“You have to work twice as hard to survive in a less enjoyable way because everything is just too expensive,” Margain remarked. “We’re just going to have a typical, laid-back day so that we can celebrate Christmas that way.”
Margain is just one of many consumers who are working hard this holiday season to stretch their money. Some signs point to a slow start to the holiday shopping season before Black Friday on November 24.
Approximately 70% of the U.S. economy is driven by consumer spending, which has continued at an unexpected rate even in the face of the Covid-19 pandemic’s disruption.
However, consumers are currently under pressure from several sources at once. Housing prices are almost at all-time highs, and rents are still rising. Credit card rates have increased significantly due to the sharp increase in interest rates over the past two years, which has also contributed to an increase in credit card debt.
The extended child tax credit has long since expired, as has the student loan pause brought on by the pandemic.
The majority of people have also spent the stimulus money and savings from the Covid-19 pandemic, though those with higher incomes have retained a larger portion of the funds.
A shift in people’s spending patterns is equally significant. According to Ted Rossman, a Bankrate contributor who writes about credit, retail spending, and consumer finance trends, people are still shopping, but they’re not as interested in buying customary holiday gifts as they once were.
The result is that, despite retailers launching large promotions in October rather than waiting for Black Friday, holiday-season spending has only kept up with inflation over the past few years. Rossman predicts that this will probably happen once more. While retailers may be disappointed, the economy won’t suffer greatly as a result.
Regarding brick-and-mortar stores, he stated that sales of toys, clothes, and holiday favorites had been dismal the previous year.
This is related to the well-known proverb that states millennials would rather spend money on events like concerts or travel than on tangible possessions. Although overall consumer spending has not decreased as a result, it has shifted away from the holiday season.
Retailers collectively form the National Retail Federation, which projects a 3%–4% increase in sales in November and December to reach approximately $960 billion.
The Consumer Financial Protection Bureau conducted a survey in 2021 and found that the top five companies in that industry originated 180 million loans, a 900% increase from 2019.
Although those loans have proved appealing to both retailers and consumers, there are still hazards associated with them. According to Eden Iscil, public policy manager for consumer advocacy group National Consumers League, the debt-to-prime lending (BNPL) market is relatively new and subject to less regulation than the credit card market.
Iscil stated that BNPL programs are less strict and that users are occasionally permitted to borrow more than they can afford, even though banks and credit cards must be cautious about how much they let people borrow.
Rossman concurs that the current credit card interest rate environment is unfavorable for excessive spending, as a result of the ongoing increase in interest rates. The average credit card interest rate is currently more than 20%, according to data from Bankrate.
He claimed that people were becoming more frugal with their money and more concerned about the status of the economy.
But there’s good news buried in there as well, according to Rossman: shoppers will be able to find better deals in 2023 than they have in recent years because supply chains and inventory management have improved and inflation has decreased.
According to Qualyn Margain, they are also searching for advantages this season. They said they have witnessed many people coming together via food and clothing exchanges or mutual aid groups in response to the challenges of the season, even though they are not hosting friends over for Thanksgiving.
They remarked, “I find it truly admirable how many people are banding together to support one another.” “I think it’s amazing how resilient the human spirit is.”
