Inflation Could Be The Grinch That Steals Christmas
Predicting A Slow Holiday Season
Record-high inflation has been the story of 2022. The latest CPI shows that’s still the main plotline as prices rose 8.3% on an annual basis in August. For reference, that’s nearly quadruple the normal rate of inflation.
Right now, Americans are spending more on staples like groceries, gas, and clothing. This means there will be less cash leftover to buy gifts when the holiday season rolls around.
Just Swipe The Card
Americans are already adjusting their financial habits just to make ends meet. For example, credit card debt has jumped by $100 billion in the past year alone. This is roughly an additional $390 in credit card debt per every US adult.
This surge in credit card debt represents a 13% increase from the year before, which is the biggest such increase in 20 years.
With that said, there might actually be a small silver lining for consumers on the horizon.
Finding the Silver Lining
Rod Sides is the vice chair at the consulting firm Deloitte and the head of its US retail and distribution division. He argued holiday spending may actually increase this year, just at a slower rate in comparison to last year.
Additionally, the holiday season is a double-edged sword. It’s a big season for consumers but it’s even bigger for businesses. The fourth quarter tends to be the most profitable time of the year for most companies, by a wide margin. Those same firms want consumers to be able to spend lots of money in and around the holidays in order to maximize profits.
If companies expect consumer spending to be lower than normal, they will most likely offer intense holiday promotions to compensate. Plus, it’s only September. By the time the holiday season arrives, the economy could be in a very different state.
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