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Key Takeaways
- Nearly three-quarters of Americans are cutting back on gift-giving this year as inflationary pressures continue to drive up consumer costs.
- A survey by BMO found that while the average American expects to spend $550 on gifts, a third of respondents didn’t expect their holiday budgets to stretch as far as in the past.
- Concerns over the cost of living are likely to extend into 2025, with more than a quarter saying they plan to cut back on spending next year.
Consumers are still spending this holiday season, but maybe not as much as in the past, a new survey showed.
According to the BMO Real Financial Progress Index, the average American expects to spend $550 on gifts this year. The survey showed that 72% of Americans said they will have fewer gifts to give this year.
The dour outlook comes after another year when price pressures persisted. Inflation ran higher than the Federal Reserve’s target of 2%. Their fight against inflation has come a long way, but a recent acceleration has some shoppers worried. The survey showed 57% of Americans said are concerned about the rising cost of living.
“The cost-of-living battle has been two steps forward, one step back with Americans experiencing a much-needed gain in disposable personal income in the fall just to be met with an uptick in inflation over that same period,” said Scott Anderson, chief U.S. economist at BMO. “Yet many are still willing to pay for festive cheer even while feeling anxious about the cost of living, driving some overall holiday spending growth.”
A Quarter of Americans Preparing to Slow Spending in 2025
The survey comes as consumers continue to demonstrate an appetite for spending. U.S. retail sales in November came in better-than-expected on strong auto sales. However, some economists saw underlying weakness in the retail sales report and projected that spending could slow in 2025.
More than a quarter of survey respondents echoed this sentiment, with 28% saying they planned to slow down spending in 2025.
“Weaker growth may be in the cards for the first half of 2025 with increasing signs of reduced consumer spending while interest rates for big-ticket items remain highly elevated,” Nationwide Senior Economist Ben Ayers wrote about the recent retail sales report.
