Amid the rising costs of many everyday items, consumers rethought their spending habits and priorities when it comes to this year’s holiday shopping.
The U.S. Bureau of Labor Statistics report titled “Consumer Price Index Summary” found that consumer spending on groceries has increased by 2 percent, the cost of shelter has increased by nearly 7 percent and transportation costs have increased by 9 percent. As a result of the increased cost of living, consumers are spending more modestly.
M1, an investing platform that allows users to invest, borrow, spend and earn money in one place, recently released a report looking at a change in consumer behavior and spending habits for the holiday season.
In particular, the high cost of travel continues to be a problem for many American consumers, with 20 percent of survey respondents reporting that they would be spending less on holiday travel this year as compared to 2022. And in line with previous WWD reports, luxury is no longer taking prominence with the rising costs of everyday necessities. As luxury spending slows during the holidays and into 2024, 30 percent of people report that they will be spending more on everyday purchases such as food and personal care.
Forty-three percent of consumers polled said they plan to spend less on luxury items such as jewelry, clothing and spa purchases for the holiday season, with 30 percent of people reporting a decrease in their restaurant and dining spending.
Similarly, a survey by Accrue Savings, a co-branded, embedded wallet, looked at consumer spending and saving their money for the holiday season. The report found that 58 percent of American consumers set a budget for their holiday spending, with Generation Z being the demographic most likely to have one (68 percent).
To prepare for the holiday spending spree, nearly 30 percent of people reported that they started budgeting since the beginning of fall and nearly 28 percent of people said they have been budgeting throughout the year. Nearly 75 percent of all respondents said that they budgeted on spending less than $999 this year during the holidays. Across all generations, Generation Z (29 percent) and Millennials (nearly 31 percent) were most likely spending more than they budgeted this year.
Consumer priorities when spending for the holidays were overwhelmingly family (nearly 58 percent), followed by significant others (nearly 23 percent) and friends (nearly 9 percent). All respondents said that they planned to spend the most on gifts (58 percent), followed by activities (10 percent) and travel (nearly 10 percent). However, Gen Z reported they were the most likely to spend on experiences in comparison to other cohorts.
More than half of the survey respondents said they plan to use credit cards to pay for holiday purchases, with 14 percent of people reporting they plan to go into debt, aligning with earlier reports that showed two-thirds of Gen Z and Millennials recognized they will go into debt because of their holiday spending.
“As we head into the new year, this new data reflects a shift towards more conservative money behavior as consumers navigate the challenges that come with inflation and rising costs this holiday season,” said Brian Barnes, founder and chief executive officer of M1.
