U.S. consumers planned to keep spending levels steady heading into the holiday season, despite a more pessimistic outlook on the overall economy, according to a new survey by 451 Research.
Wage growth, particularly among lower-income workers, and more holiday gatherings compared to 2020 are expected to help offset concerns about inflation and the COVID-19 pandemic, spurring shoppers to spend more this year than last, according to retail experts.
451's Voice of the Customer: Macroeconomic Outlook, Consumer Spending and OTT Streaming (Population Representative), Holiday Spending Preview 2021, fielded in October, found spending plans among consumers appeared largely "stable," with higher-income households making more than $125,000 and lower-income households making less than $75,000 both showing improvements in holiday spending plans compared to last year, said Michael Nocerino, research analyst with 451.
"People are still out there still spending," Nocerino said.
About 46% of overall survey respondents indicated that their spending would remain the same over the next 90 days while 19.7% said they would increase spending. About 20% said they would decrease spending over the next 90 days. Another 14% were undecided.
The survey results offer a bellwether of consumer behavior during the fourth quarter, an important sales season for e-commerce retailers including Walmart Inc. and Amazon.com Inc. The National Retail Federation is expecting holiday sales during November and December to grow between 8.5% and 10.5% over 2020, to between $843.4 billion and $859 billion in total sales.
"Wages are up really for every tier but particularly for lower-income consumers. That should at least partially offset the fact that there are fewer stimulus checks in the system," said Arun Sundaram, senior equity research analyst at CFRA.
However, supply-chain issues could still prove a drag on sales. "If retailers don't have the right products on the shelves, and consumers aren't able to get them, that's where we will see a miss," Sundaram said.
Pocketbook pressures
While most of 451's survey respondents expected their spending to remain steady or increase this holiday season, they still expressed concern about the economy and growing pressures on their pocketbooks.
About 21% of survey respondents expected the economy to improve over the next 90 days, while nearly 45% believed it would worsen.
Of the minority that indicated their spending would decrease, about 44% of respondents cited increased cost-of-living expenses for food, energy and housing as the most important factor driving that decline, while another 41% said they wanted to save more. Staying at home more due to COVID-19 was cited as a top consideration by 30.5% of respondents reporting decreased spending plans.
Concerns about inflation outpaced those related to the pandemic. About 34% of survey respondents said U.S. inflation poses the greatest threat to their personal finances, followed by COVID-19 (24.3%) and energy prices (21.2%).
It remains to be seen how much those concerns will weigh on holiday spending.
"If prices continue to be high, it is going to take a bite out of consumer discretionary spending," said 451's Nocerino.
451 Research is a part of S&P Global Market Intelligence.