Holiday Spending Expected to Decline
December 14, 2023
Holiday spending will be less this holiday season, writes Peter Watson.
There are many significant headwinds that will limit spending this holiday season.
Our economic fabric is less solid than it has been in previous years. Many just do not have enough extra money to spend on holiday gifts.
Inflation is high and everything seems to cost a whole lot more than just a few years ago. Interest rates are high, and many homeowners have already seen a significant spike in mortgage payments.
The lucky ones who still have a low mortgage interest rate know that will end soon when their current mortgage ends and must be renewed. They will be more conservative with holiday spending in anticipation of higher mortgage payments that are just around the corner.
According to a recent Deloitte Canada survey, spending this year will be down 11 per cent versus one year ago. That is the lowest level of anticipated holiday spending since the Deloitte survey started five years ago. Added to our current economic hardships is the belief that a recession is coming. Over half of those surveyed believe this.
The outlook for holiday spending declines will have a ripple effect. Many retailers rely on holiday season for robust sales. This will likely not happen.
Stores will have the challenge of excess year-end inventory. Retailers anticipating this will likely have significant sales before Christmas to dump inventory.
That will hurt retailers but will be a plus for shoppers in search of better deals.
One final comment in the declining outlook for sales activity is consumer distrust. Three in four people feel retailers are raising prices unfairly.
These are challenging times. Both shoppers and retailers will be under financial pressure this holiday season.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com