This is how inflation changes holiday offers and purchases

Near-record inflation has overshadowed this year’s Christmas shopping season, which officially began on Black Friday. Higher prices are one of the main reasons retailers are predicting another record spending year. Still, there are some relatively big discounts if you know where to look.

Here are a few trends dominating another chaotic end to the retail year.

We spend more to buy less, but not everywhere.

Overall, Christmas shopping costs more, both online and in stores. The National Retail Federation expects shoppers to spend between 6% and 8% more than last year. That’s a bigger increase than usual, but inflation — averaging nearly 8% at the end of October — accounts for much of it.

Buyers are chasing sales even more than they do in a typical year. In surveys, more and more people say they will turn to discount and dollar stores for their Christmas shopping.

“Prices are going up… and our budget is smaller than last November,” Manuel Rojas said upon arriving at a TJMaxx in Hyattsville, Maryland, just outside of Washington, DC. He planned on buying the same dolls he found last year and hoping they were on sale.

At a mall next door, some people said inflation has pushed them to reconsider their grocery spending – but they’re not ready to cut back on Christmas gifts just yet.

Some data shows that the prices of some things have started to fall. Adobe Analytics, which tracks online purchases, has found some of the largest price drops to date on electronics and computers, home appliances, televisions and clothing.

Clothing prices that have fallen in recent months illustrate what’s going on: many stores are having a “stock glut,” or too many wrong things in stock. You’ve ordered too many of last year’s hottest items just to deal with disorganized supply chains and rapidly changing (post)pandemic trends.

While many shoppers want deals, luxury items still appeal to the wealthy

The National Retail Federation estimates that people want to spend an average of $833 on gifts, cards, decorations, groceries and other holiday shopping — slightly up from last year.

But take a closer look at family income, and the story changes. Those in households earning less than $75,000 a year are expected to spend less than the year before, an average of $606. Meanwhile, people in households earning over $150,000 a year plan to spend more, averaging $1,304.

This divergence in spending has widened over the year as wealthier people continued to buy luxury goods that had little impact on inflation, while other shoppers began to switch from more expensive options and brands to cheaper alternatives and private label.

People are betting on savings and credit cards

Many people are heading into the holiday season with the lowest savings they’ve had in a while, having used up everything they’ve saved during the pandemic.

So people buy on credit. According to the Federal Reserve Bank of New York’s report for this month, credit card balances are up 15% year over year. This is the largest increase in more than 20 years. Adobe Analytics reports a 13 percent increase in the number of users opting for Buy Now, Pay Later plans compared to last year.

In the face of high interest rates, experts are urging people to pay off all debts as soon as possible.

“If you have existing credit card debt, make a plan to pay it off as aggressively as your budget allows,” Sara Rathner, a personal finance expert at NerdWallet, told NPR earlier this month. “I would also say if you have credit card debt, stop using your credit cards.”

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