December 5, 2022
Shopping for the holidays is already well underway, and inflation could end up being the Grinch who steals Christmas this year.
Retailers in the United States, including Amazon, Walmart, and Target, have issued warnings about lower sales projections for the fourth quarter, which is crucial for sales because of the boost from holiday shopping.
In a recent episode of S&P Global Market Intelligence’s “MediaTalk” podcast, 451 Research analyst Michael Nocerino stated that this year, “inflation is having a suppressing effect on consumer sentiment as well as consumer activity.” Overall sales are being hampered by consumers’ inability to spend “more on less,” according to Nocerino. A division of S&P Global Market Intelligence is 451 Research.
Consumers in the United States expressed anxiety about inflation and energy prices in a study conducted by 451 Research in October, with lower-income households reporting greater pressure to cut back on holiday spending. While households making over $100,000 anticipated to spend slightly more than last year, survey respondents in households making less than $50,000 predicted a significant decline in Christmas spending.
The discrepancy is brought on by the fact that consumers in lower-income households said they anticipate raising nondiscretionary spending this holiday season, particularly on food, utilities, and housing.
Taking inflation into account, S&P Global Market Intelligence economists predict that overall holiday sales will fall 1.2% from last year.
Sales during the holidays are predicted to increase 4.5%, inflation excluded. That is above average historically, although it is not as high as the growth experienced over the previous two years, when pandemic-related patterns sparked exceptional demand. According to the estimates, people are changing their buying habits as a new normal starts to take shape.
According to a research released on Nov. 16 by S&P Global Market Intelligence experts, “the pandemic surge in demand for products is over, and any post-pandemic pent-up demand for services appears to be fully exhausted.”
However, sales in October, which reflect the earliest holiday shopping tendencies, outperformed expectations. Sales by non-store retailers, such as e-commerce and direct sellers, increased by 11.5% year over year. Although growth in this sector has slowed in 2022, e-commerce sales still beat pre-pandemic patterns.
Source: S&P Global – Daily Update
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