Inflation to Negatively Impact Holiday Shopping

As holiday shopping season approaches, consumers may be concerned about the effects of inflation. After all, the economy is already experiencing a high rate of inflation, so what can consumers do to protect themselves? One option is to put money in high interest savings accounts. Another option is to invest in inflation-protected bonds.

This year, retailers are likely to see lower sales and slimmer margins due to higher prices. Retailers are already faced with multiple challenges heading into the holiday season, including rising interest rates, labor shortages, supply chain disruptions, and pandemic-inspired customer expectations. Rising food costs and fluctuating stock markets are also adding to consumers’ anxiety over the future of the economy.

With a higher price tag, consumers are likely to wait for good deals to buy gifts. Meanwhile, about one-third of consumers will use cash or credit cards to pay for gifts. Another one-third plan to pay for gifts with coupons or store-specific cards. A fifth of consumers will start shopping early to avoid higher prices.

Inflation affects holiday shopping because it drives up prices. The Consumer Price Index (CPI) rose 8.5% in July. This figure includes gasoline, food, and housing prices. Typically, consumers start their holiday shopping in October and are out for the night by Thanksgiving. In fact, half of all holiday shoppers start searching for deals in October. This means that the holiday shopping season will be negatively affected if inflation continues to rise.

Several countries are experiencing high inflation rates. Mexico, Russia, and Indonesia are among the worst. Inflation rates in these countries have reached five and six-digit levels in recent years. This year, consumers are less confident about their holiday plans and are already buying less than last year. The holiday season will be impacted by supply chain issues. While many countries will experience flat or declining inflation, some countries will experience a spike of four and seven-digit inflation rates.

Sales tax holidays have had an effect on consumer spending. In Alabama, for example, a sales tax holiday has boosted prices on computer purchases. The author of that study argues that retailers overshift the benefit of the sales tax holiday to consumers. This has an impact on businesses, because they may have to hire temporary workers and pay overtime compensation to keep up with increased demand.

Despite this, analysts still expect the holiday shopping season to be the strongest since 1999. Last year, the holiday season saw an average increase of 5.8 percent, exceeding expectations by nearly five percent. Moreover, growth in disposable personal income is expected to continue, which could further boost the retail sector’s overall growth rate.

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