David Paul Morris/Bloomberg via Getty Images
The Key Takeaways
- As inflationary pressures increase consumer prices, nearly three quarters of Americans will cut back on their gift giving this holiday season.
- BMO conducted a survey that found while most Americans expected to spend about $550 for gifts this holiday season, only a third thought their budgets could stretch to the same extent as they had in previous years.
- The cost of life is likely to continue to be a concern until 2025. In fact, more than 25% plan to make cuts in spending for next year.
According to a recent survey, consumers may not be spending as much this year as in years past.
BMO Real Financial Progress Index states that Americans expect to spend an average of $550 per person on Christmas gifts. In the survey 72% said that they would have less to give as gifts in this coming year.
This gloomy forecast comes on the heels of another year in which price pressures continued. The Federal Reserve set a target for inflation of 2%. However, the rate was higher. Some shoppers are worried about the recent increase in inflation. According to the survey, 57% of Americans are worried about rising costs of living.
“The cost-of-living battle has been two steps forward, one step back with Americans experiencing a much-needed gain in disposable personal income in the fall just to be met with an uptick in inflation over that same period,” Scott Anderson is the chief U.S. economic economist for BMO. “Yet many are still willing to pay for festive cheer even while feeling anxious about the cost of living, driving some overall holiday spending growth.”
One quarter of Americans are planning to slow down their spending in 2025
Consumers continue to show a strong desire for purchases. The U.S. sales of retail goods in November exceeded expectations due to strong sales of autos. Some economists did see underlying weaknesses in the retail report, and forecast that spending might slow by 2025.
Over a quarter (25%) of respondents to the survey echoed that sentiment. 28% said they intended to reduce spending by 2025.
“Weaker growth may be in the cards for the first half of 2025 with increasing signs of reduced consumer spending while interest rates for big-ticket items remain highly elevated,” Ben Ayers, Senior economist at Nationwide, wrote about a recent report on retail sales.
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