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- Two new BofA reports warn holiday spending may tighten as prices keep rising.
- Shoppers may feel the pinch as inflation, tariffs, and higher costs put a strain on their budgets.
- Electronics and jewelry could see the sharpest pullback as tariffs drive up prices.
Santa won't be the only one tightening his belt this year — the American consumer is already feeling the pinch, and many haven't even finished digesting their Thanksgiving stuffing. As we head into Black Friday weekend, the forecast for holiday shoppers may be chilly: prices on consumer goods are rising faster than is comfortable for many gift-givers, according to two recent reports by Bank of America.
Sixty-two percent of the more than 2,000 respondents to Bank of America's holiday survey, conducted in late summer, said they expected financial strain tied to holiday expenses, and 58% say gifts feel more expensive.
More than half of the respondents pointed to tariffs as a suspected cause. The firm found that tariffs announced this spring likely contributed to price increases in categories such as electronics and jewelry, goods often purchased as holiday gifts.
Holiday spending per household is up about 6% according to the bank's card data, yet retail transaction volumes have declined slightly over the course of the year. The takeaway: shoppers are shelling out more, only to walk away with less.
BofA's reports also point to a widening chasm in how those along different income brackets are likely to experience the season's bounty.
Higher-income households continue to show spending and wage growth that outpace everyone else. Many white-collar professionals, such as Wall Street investment bankers, are expected to have surging bonus years, according to forecasts, which is likely to hand six-figure year-end incentive pay for higher-income earners.
Buyer's remorse
For everyone else, the most wonderful time of the year is already fomenting stress at the checkout counter.
Electronics spending per transaction jumped nearly 8% in a single month after the spring tariffs, and jewelry spending rose about four percentage points after an August tariff announcement, the bank found. Add in record-high gold prices this year — which have made gold-based pieces costlier — and suddenly, holiday gift-giving has relinquished some of its luster.
With rising prices leaving some shoppers with fewer items to buy, survey respondents say they're getting more selective about who will end up on their "naughty" or "nice" lists.
Thirty-eight percent say they'll only buy gifts for immediate family and close friends, while 23% have agreed with relatives to scale back their gift-giving.
Among those feeling financial strain, 87% plan to shop at discount stores to counter rising prices, and 51% say they'd consider gifting a "dupe," a cheaper imitation of a luxury item. More than half said they planned to kick off their shopping sprees earlier than usual to spread out expenses, the survey found.
Card data showed that spending by high earners increased roughly 3% over the past year, compared with less than 1% for lower-income households. The firm said wage growth followed a similar split — after-tax pay rose about 4% for higher earners, but only about 1% for those at the bottom. Goldman Sachs, meanwhile, is warning that the labor market is softening across tech, manufacturing, and other sectors, which could squeeze those already on the edge.
That means, with prices climbing and paychecks under pressure, holiday shoppers may be left wondering who's actually going to come down the chimney this year: Santa Claus with a sack of toys, or the Grinch, offering only an inflationary pinch.
Read the original article on Business Insider
