Holiday Shoppers May Pull Back Spending Despite Strong Black Friday

Before the start of the holiday shopping season, market research data suggested there would be generalized cost cutting across all spending categories and demographic groups.

Consumers were expected to be stretching their budgets, but despite widespread inflation, Black Friday saw a spending surge. Now, data suggests the rest of the holiday shopping season will see consumers cutting back in most categories except groceries and gifts.

New Reality Check: The Paycheck-to-Paycheck Report, The Holiday Shopping Deep Dive Edition,” is a PYMNTS Intelligence research study done in collaboration with LendingClub. It explores the factors driving holiday shoppers to be conservative in their spending this year.

According to the study, 40% of consumers in the United States expect to spend more on groceries during the holiday season. In the rest of the consumer categories, such as restaurants, travel and retail products other than gifts, the percentage of people who expect to pull back their spending is higher than those who expect to spend more.

Share of consumers citing how much their spending will be compared to last year

However, spending more on groceries doesn’t necessarily equate to buying a larger quantity of products or making more trips to the store. Some categories of foodstuffs have increased. For instance, the price index for cereals and bakery products rose 4.2% over the 12 months ending in October, per the latest Consumer Price Index report. The remaining major grocery store food group indexes posted increases ranging from 0.4% to 3.6%. This explains why a good portion of Americans expect to spend more on groceries this holiday season than last year.

Meanwhile, many consumers are adopting conservative shopping strategies to cope with inflation. Data from PYMNTS Intelligence’s Consumer Inflation series revealed that almost half of grocery shoppers traded down by purchasing from merchants with lower prices, and 35% switched to buying lower-quality items or private-label products.

“Overall, consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt, and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs in their family budgets,” Target CEO Brian Cornell said on the company’s earnings call in November.