Inflation, Consumer Confidence Point to Bumpy Holiday Spending Season

holiday gift budget

Connect the dots and the data points and trouble may loom for the holiday season.

Inflation is on the rise. Purchasing power is waning. Consumer confidence seems wobbly — and as a result we may find that consumers pivot toward buying the goods and services that they “must” have rather than gifting everyone on their list.

As noted in this space, consumer confidence fell for the second month in a row, as the pandemic lingers and inflation ticks up. The latest reading from the Conference Board stood at 109.3 in September, where it had been 115.2 the month before.

Read here: US Consumer Confidence Dips for Second Month

The numbers fell to 109.3 in September after being revised to 115.2 in August, per the release. Consumers had reduced their expectations to buy larger-ticket items such as homes, major appliances and automobiles. It’s not far-fetched to think that if current trends continue, then that hesitation to spend may translate to smaller, everyday items — or the gifts that pile up for relatives and friends in advance of, and during, the holiday shopping season.

Retailers are, in a way, trying to gain as much traction as they can, with an eye on top-line torque — sooner rather than later. There already has been an acceleration in holiday shopping deals and promotions. The Target Deals Event, of course, is on its way this month, and the company also has opened its Holiday Price Match Guarantee. Amazon has ben moving its Black Friday deals up on the calendar.

Read also: Retailers Embrace Early Holiday Shopping to Combat Tangled Supply Chains

Supply Chain Issues

Along with the inflation, of course, comes the fact that supply chain issues are making it more expensive for retailers (to the tune of a few hundreds of billions of dollars) and other merchants to get whatever they can get in place to satisfy customer demand (or: anticipated consumer demand).

As we reported late last month, the Bureau of Labor Statistics said that for the 12 months ending in August, grocery prices were up  3.7%. Drilling down a bit, the prices of food consumed at home were up 3%. Many segments of what people buy to consume saw prices rise: The Labor Department stats show that the index for meats, poultry, fish and eggs rose 0.7% over the month; the beef index rose 1.7%. The index for fruits and vegetables rose 0.2% in August.  More than half of consumers in the US live paycheck to paycheck, which means they have challenges in making ends meet.

But there are other pressures in place that may mute that old sentiment that it is “better to give than receive.” Namely, paying for basic staples will eat into discretionary income that might be otherwise available for gifting.

Read more: As Grocery Bills Rise, Living Paycheck to Paycheck Gets Tougher