Retailers may be forecasting record-breaking sales for the holiday shopping season, but low-income customers are struggling as they bear the brunt of the highest inflation in 39 years.
The government’s report last week that consumer prices jumped 6.8% over the past year showed that some of the largest cost spikes have been for such necessities as food, energy, housing, autos and clothing.
Overall, rising prices are changing shopping habits for many Americans. For some, they’re a mere inconvenience, pushing them to delay building a deck on their house amid higher lumber prices. But for lower-income households with little or no cash cushions, they’re making harder choices such as whether they can put food on the table or if they’ll have to drastically scale back on holiday presents for their children — or forgo them completely.
“Inflation is devastating the pocketbooks of low-income households,” said C. Britt Beemer, chairman of the America’s Research Group, estimating that low-income households are cutting back their holiday buying by 20% from a year ago. “They are going to have to decide what they are going to buy and what they’re going to eat.”
Even some retailers that built their businesses around the allure of ultra-low prices have begun boosting them. Dollar Tree — the last true dollar store — is increasing its prices to $1.25 for a majority of its products because of higher costs of goods and freight.
Despite the inflation pressures — as well as supply chain disruptions and the new COVID-19 omicron variant — the National Retail Federation says this year’s holiday shopping season appears to be on track to exceed its sales growth forecast of between 8.5% and 10.5%.
According to a poll by The Associated Press-NORC Center for Public Affairs Research, about three-quarters of Americans say they will be giving gifts to friends and family to celebrate the winter holidays this year. But the rising costs have not gone unnoticed. About 6 in 10 Americans say holiday gift prices are higher than usual, while only 2 in 10 say they are not. Roughly 2 in 10 say they did not purchase gifts recently.
Overall, 4 in 10 Americans say it has been harder to afford the things they want to give as gifts this year. Roughly half say it’s neither easier nor harder, while few say it has been easier.
But people in lower income groups are feeling the cost pressures most acutely.
Forty-five percent of Americans in households earning less than $50,000 annually and 40% in households earning between $50,000 and $100,000 say it has been harder to afford gifts this year, compared with 30% in higher income households.
“It was hard enough a year ago, five years ago, for lower-income families to find extra money to buy gifts. But it is that much harder now,” said Ted Rossman, senior industry analyst at CreditCards.com, whose survey in October found a significant number of low-income people were completely opting out of holiday gifting this year amid higher prices on essentials.