2022 has been the year of inflation. Prices have soared at rates we haven’t seen since the 1980s. The Federal Reserve’s response has been to jack up interest rates, laying extra pain on people who use credit cards or loans to try to keep up.
As the year comes to a close and the holidays approach, we’re all making plans for holiday shopping, and businesses small and large are anticipating the usual annual spending jump, something many businesses count on to make ends meet.
We wanted a forward look at holiday shopping and how inflation is affecting shopping decisions, so we ran a survey on the topic. Here’s what we found.
Key Findings
- 82.5% of respondents expect to cut back on holiday spending.
- Gifts for family members are the leading target, cited by 48.81% of respondents.
- Electronics were cited by 42.8% of respondents as a target for cutbacks, with jewelry and watches close behind at 41.45%.
- People of all income levels expect to cut back on holiday spending. Respondents earning over $150,000/year are trimming spending almost as much as those earning under $50,000 per year
- Older consumers are slightly less likely to cut back on spending than younger ones, but only by a small margin.
The Impact of Inflation on Holiday Spending
This is what our respondents said about the impact of inflation on their holiday plans.
Who Will Reduce Spending?
A large majority of respondents will reduce holiday spending. Overall, only 17.5% of respondents did not expect to cut back on holiday spending.
Income had some impact on the decision to reduce holiday spending, but it was less than expected. Almost 87% of those earning under $50,000/year said they would reduce spending. In all other income groups – including those earning over $150,000/year – the figure was close to 80%.
Do you expect to cut back on holiday spending this year?
Respondents over 60 were least likely to say they were reducing spending, although a large majority – 75.65% – will cut back. For those 45-60, the figure was 81.65%, and 85% to 90% of younger respondents will reduce spending.
Do you expect to cut back on holiday spending this year?
Where Will They Cut?
The targets for spending cuts were quite consistent across the groups surveyed. Gifts for family members (48.61%) and for friends (44.35%) were the leading responses, drawing very similar response rates across age and income groups.
Respondents aged 30-60 were most likely to cut back on gifts for children, averaging 30%, while older and younger respondents were closer to 20%, presumably because they are less likely to have children.
Holiday travel was a consistent target at around 40% across groups, while around 30% across groups expected to reduce spending on food and alcohol.
What do you expect to cut back on this upcoming holiday season?
What Gifts are Most Likely to be Cut?
Manufacturers and merchants selling electronics won’t be happy with the results here: 42.8% of respondents planned to cut spending on gifts in the category, followed closely by jewelry and watches at 41.45%.
Other top targets for spending cuts were Memberships (28.21%), Sports Equipment (27.89%), Cosmetics and Perfumes (30.28%), Toys (25.76%, and Gift Cards (24.21%).
Again, these responses showed very similar patterns across age, income, and gender lines, rarely varying by more than a few percentage points.
If you plan on cutting back on gifts this holiday season, which gifts are you most likely to skip buying?
The Takeaways
We wouldn’t want to place too much weight on a single survey, but there are some very clear patterns in the data we obtained.
- Almost everyone is cutting spending. 80% to 90% of every group surveyed, across age, gender, and income categories intend to reduce holiday spending.
- Income doesn’t matter. People with higher incomes were presumably spending more on the holidays in the first place, but even the highest income categories surveyed said they will spend less.
- Cutbacks are consistent. We expected to see much more variation, with people of different ages, genders and incomes targeting different areas for cuts. We didn’t. Percentages rarely varied by more than a few percentage points across categories.
- Don’t expect a lot of gifts. You’ll probably be disappointed, especially if you were hoping for electronics, jewelry, or a watch.
- Businesses will feel the pain. The holidays aren’t just about the satisfaction of giving and receiving. Many people will be stressed over not giving more or disappointed by not receiving more, but businesses that depend on holiday spending are likely to take a much more measurable hit.
There is one more positive – though still speculative – aspect to these findings. Reduced spending indicates lower demand for goods, which in turn reduces upward pressure on prices. If spending cuts persist, inflation may slow, and the Fed may feel less pressure to raise rates, bringing some relief to consumers.
Of course, it’s by no means clear that this will happen, but with inflation in the process of stealing Christmas, we can use all the hopeful signs we can get!
About This Survey
The survey responses were collected in October 2022, via SurveyMonkey, with a total of 1,549 participants from across the USA. Respondents represent a national sample balanced by census data of age, gender, income level, and region. The survey had a margin of error +/- 4.159% with a 95% confidence level.
Copyright Information: All the data included in this study is available via public domain. This means all statistics may be copied without permission. We do, however, appreciate citation as the source via a link.
