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Despite COVID-19 Impact on Finances, Consumer Spending to Remain the Same This Holiday Season
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With coronavirus cases surging due to the delta variant, consumers having less spending power because of inflation, slower income growth and smaller dips in unemployment, it might come as no surprise that consumer optimism is at a low.
In fact, the University of Michigan’s Index of Consumer Sentiment, which measures how U.S. consumers feel about their finances and the state of the economy, fell a staggering 13.4% between July 2021 and August 2021, the worst month-to-month drop in the last decade.
What might be a surprise is that some American consumers say they plan to continue doling out some cash during the holidays. According to a recent online survey fielded by Emeryville, Calif.-based management consulting firm BRG Retail, nearly half (48%) of consumers expect their holiday spending this year to be about the same as last year, 28% expect to spend more and 20% predict they’ll spend less.
Younger Americans expected to spend more
Among consumers who foresee their holiday spending increasing this year, younger folks (ages 18 to 34) are more likely to spend more than last holiday season.
Meanwhile, for those who say they expect to spend less for the holidays than in years’ past, their reasons can be chalked up to lower income (44%), a bump in other expenses (41%) and harboring worries about personal finances and the economy at large (38%).
But no matter how many dollars they spend, what will consumers be spending them on? The largest categories consumers expect to spend the most on (30% or more of survey respondents) are clothing, gift cards, electronics, toys and personal care items.
4 in 10 consumers doing the same financially as last year
Survey respondents were asked to compare their financial situation to the same time last year: While 41% say they’re doing roughly the same as this time in 2020, 23% report they’re somewhat better off, while 15% say they’re far better off moneywise. Among those worse off financially, 16% say they’re somewhat worse off, while 5% say they’re doing far worse.
The top worries on consumers’ minds are the state of the U.S. economy (45%), U.S. inflation (45%), a family member contracting the coronavirus (40%), state and local government enforcing new lockdown measures due to the pandemic (35%) and getting the coronavirus themselves (33%).
Breaking it down by demographics, older generations express the most concern about their financial situations. Female survey participants are also more worried than their male counterparts, while those living in urban areas tend to be more positive about their finances than rural denizens.
COVID-19 concerns on the mind
And as one might expect, consumers have concerns that the COVID-19 pandemic will throw a wrench in their holiday plans. Nearly 6 in 10 respondents (59%) are either somewhat or very concerned that the pandemic will impact their ability to celebrate come December and January.
Despite these worries, consumers plan to holiday shop as usual, with the majority starting their shopping in October or later:
- Starting their shopping in October (20%)
- Starting their shopping in early November (24%)
- Starting their shopping on Black Friday or Cyber Monday (8%)
- Starting their shopping in December (9%)
Consumers who temper financial concerns with the impending holiday shopping should be cautious not to incur too much debt to avoid a holiday debt hangover.
To avoid too much credit card debt, consumers can aim to get started as early as possible, spread out their shopping throughout a few months, look for sales and track spending on their cards. They can also use reward points from a cashback credit card toward gifts.
Methodology: Between Aug. 9-11, 2021, BRG Retail surveyed 1,042 U.S. adults 18 and older.