Holiday shoppers budget their way around higher prices

American consumers are learning to live with high prices—at least when it comes to their holiday spending.

With Christmas just over a couple of months away, shoppers plan to spend at levels higher since COVID disrupted lives and economies around the world, a survey from consulting firm Deloitte showed on Tuesday.

At a time when inflation is nearly double the rate the Federal Reserve target of 2 percent, consumers are prepared to navigate the environment of high prices ahead of the holidays but will be a little more discriminating in the way they spend their cash.

They are budgeting for fewer gifts, buying more gift cards and looking for deals during Black Friday and Cyber Monday sales.

Consumers keep defying expectations that their spending will slow amidst the Fed’s hiking of rates to historic highs that have made the cost of credit more expensive and as Americans see increased expenses, such as student loan repayments and childcare costs.

But consumers keep showing their strength as illustrated by higher-than-expected retail sales in September and their willingness to fork out nearly $1,700 on average for holiday gifts, a 14 percent jump from a year ago, according to Deloitte.

“Although inflation shows signs of moderating, consumers have come to expect higher prices and are adjusting their holiday spending accordingly,” Nick Handrinos, vice chairman at Deloitte LLP, said in a statement.

Shoppers, nearly all of whom plan to buy gifts, are under no illusion over the cost of things, with more than 70 percent anticipating high prices on the shelf. They will try to find every opportunity for savings, such as opting to buy things in-store if it means they can save money, the survey found. Customers will also wait for promotions to stretch their money as far as it can go.

Americans making between $50,000 to $99,999 plan to spend more than all the other income groups this year by more than a quarter from last year, Deloitte found.

Holiday spending that Deloitte says is returning to normal levels after the volatility seen during and immediately after the pandemic suggests that consumers are willing to pay for things beyond their necessary expenses, despite their dour outlook on the economy. It indicates that consumers are just accepting of high prices for goods and services.

“We expect to see shoppers make their lists and check them twice for deals, but a return to pre-pandemic spending levels shows promise for the season overall,” Handrinos said.

Buyers have shortened their shopping lists this year, and most shopping is expected to take place in late November and early December, according to Deloitte, starting during Thanksgiving week as they plan to leverage opportunities for sales during and after the holiday.

“After several years of uncertainty, shoppers return to the familiar to make their holiday celebrations shine,” Brian McCarthy, a retail strategy expert at Deloitte, said in the statement.