After Consumer Survey, Experts Warn Holiday Shoppers May Be Spending Less

November 16, 2022  by HFBusiness Staff in Business Strategy, Industry   

The Holiday Shopping Edition examines the financial lifestyles and spending choices of U.S. consumers going into the 2022 holiday shopping season. 

Against a backdrop of ongoing inflation and increased cost of living, 60% of U.S. consumers were living paycheck to paycheck in Oct. 2022, a rise of 4 percentage points from Oct. 2021. Middle-income consumers saw the steepest increase in paycheck-to-paycheck status, jumping 7 percentage points in the past year to 65%.

The share of consumers living paycheck to paycheck without difficulty paying their monthly bills now equals the share of consumers not living paycheck to paycheck, both at 40%.

According to the report, financially struggling consumers cited a nearly full saturation of their credit card balances in Oct. 2022.

"More consumers who have historically managed their budgets comfortably are feeling the financial strain, which will impact their spending behavior as we head into the holiday shopping season," said Anuj Nayar, financial health officer at LendingClub.

"Average monthly household expenses have gone up $445 a month on average, and, even with the rising food costs, we're seeing that people will still prioritize family gatherings and dinners this holiday season. That'll leave less available cash and, if this trend continues, we'll see more U.S. consumers exercise caution before spending on gifts and entertainment this holiday season," offered Nayar.

Fifteen million consumers who shopped for holiday gifts in 2021 don't plan to do so this year. Moreover, nearly one-quarter of consumers who do plan to shop during the 2022 holiday season expect to spend less than last year.

Amid rising prices for goods and services, the research finds that 23% of consumers across the various income brackets will spend less in 2022 than they did in 2021, with 75% of respondents citing reduced spending capacity. That said, 79% of all consumers plan to shop this holiday season, more than a 10% decrease from 88% in 2021.

Even so, many consumers will try to save money this holiday season by finding the best deals. Low prices and discounts will drive more of shoppers' holiday spending in 2022 than convenience. In fact, low prices and discounts will determine where 44% of shoppers will make their holiday purchases in 2022.

Nearly four in 10 holiday shoppers intend to use financing – such as credit cards, personal loans and buy now pay later (BNPL) – to pay for one or more of their holiday purchases in 2022.

This includes one-quarter of consumers who are not living paycheck to paycheck and half of financially struggling paycheck-to-paycheck consumers. That's a slightly higher share than the 34% who used financing in 2021.

"As many believe that a recession is approaching, now is the time for consumers to deploy financial survival strategies that can help them shore up their personal balance sheets for the new year," continued Nayar.

"The data is telling us we'll pay more this holiday season and one of the worst things consumers can do is finance gifts on a credit card that they don't intend to pay off at the end of the month, especially in a rising interest rate environment.”

“For example, if you have an outstanding credit card balance of $10,000 with an 18% interest rate at the end of the holiday season and you only pay $200 a month, you'd end up paying $8,622 in interest alone with an end date of 94 months! Now more than ever, it's important to live within your means,” concluded Nayar.