by Ashley Allen Reade
The most expensive time of the year is winding down and the numbers are in. Retail sales ended up being 7.6% higher for Christmas 2022 than for Christmas 2021. While that sounds like a good sign that Americans spent more, it isn’t because they are more prosperous.
They spent more because everything costs more. Inflation, officially up by 5.5%, has created artificial hope for those who look at the statistics without context.
In general, holiday spending in the United States can vary significantly from year to year and is influenced by a number of factors, including the state of the economy, consumer confidence, and cultural traditions. It is also worth noting that people’s holiday spending habits can vary widely depending on their individual circumstances and priorities.
What did they spend money on?
According to Fox Business:
Americans chose to eat out during the holidays, with restaurant spending up 15.1% over the same time frame in 2021. Clothing rose 4.4%, while in-store sales rose 6.8% and online sales rose 10.6%.
During the holiday season, people in the United States often spend money on gifts for friends and family, decorations for their homes, and travel. They may also spend money on food, parties, and other holiday-related expenses. If the price of these things has increased, so too will the spending of the public.
So why was spending really up?
The real question here is whether or not consumers got more stuff for the additional money or were forced to spend the additional money to get less stuff due to inflation.
CNN Business notes that consumers “spent like crazy” this year:
The Personal Consumption Expenditures price index — the Federal Reserve’s preferred measure of inflation — rose 5.5% in November from a year earlier, the Commerce Department reported Friday.
“Consumers and retailers navigated the season well, displaying resilience amid increasing economic pressures,” Michelle Meyer, North America Chief Economist at the Mastercard Economics Institute, said in a statement.
According to Mastercard, consumers diversified their spending to cope with higher prices and prioritized dining out and other experiences. Restaurant sales grew more than 15% compared to the same period last year.
American shoppers also displayed a growing preference for shopping online, with online sales growing 10.6% year-over-year and ecommerce making up 21.6% of total retail sales, up from 20.9% in 2021.
Inflation isn’t the only negative sign, however.
Putting it on plastic
The numbers are somewhat artificial because it isn’t money that many people spent, but credit. Credit card debt has been escalating as people try to maintain their previous standard of living despite soaring inflation and wages that don’t match it. The Deseret News reported:
…the Federal Reserve Bank of New York released data showing that household debt in the United States rose faster in the third quarter of this year than at any time since 2008. We added $351 billion in overall debt, with higher-interest mortgages leading the way.
But the report said we also added the most credit card debt in 20 years, increasing our collective balances by 15% over this time in 2021. This, at a time when interest rates are topping 19% on those cards, and when you don’t have to Google too hard to find warnings of a possible looming recession.
Experts were couching this news by noting that delinquency rates remain low. Wells Fargo economist Shannon Seery told Deseret News reporter Art Raymond that most households still have enough disposable income to handle a bit more debt. Seery said to expect a 6% increase in holiday spending this year, but most of that will be due to inflation.
This makes it more difficult to get a handle on inflation.
“It is tempting to cheer on the ‘resilience’ of the consumer, but the staying power of spending gives businesses no incentive to forgo price increases, thereby making the task of getting inflation in check more difficult for policymakers,” Seery wrote in a Federal Reserve blog, along with economist Tim Quinlan.
The buy-now-pay-later mindset is not feasible in an economy in which prices keep going up but people’s incomes are not keeping pace.
As usual, it’s the lower-income households that will suffer first and hardest.
Many families making less than $50,000 per year are already having difficulty meeting their minimum payments. Add more purchases to these balances and the strain will catch up with them almost immediately. What’s more, interest rates have also skyrocketed, making those debts increase far more rapidly.
From Yahoo News:
Once flush with additional savings from the pandemic, many consumers have exhausted that excess cash due to ongoing inflationary pressures and are now turning to credit cards to fund their holiday spending.
“Wage growth has been averaging about 5%, but inflation is running around 7%,” said Ted Rossman, senior industry analyst at Bankrate.com and Creditcards.com. “Consumers are upside down, essentially. That’s primarily why sentiment has been so depressed.”
But any gains in savings from the pandemic have been exhausted.
New data from the Bureau of Economic Analysis shows that the U.S. personal savings rate has plummeted to 2.3%. That’s a 17-year low.
“People are also reluctant to scale back their standard of living and haven’t yet adjusted their budgets, so their first impulse is to borrow,” Barrington said…
…Americans are falling deeper into debt. Balances jumped 15% year-over-year in the third quarter. That’s the largest annual increase in more than 20 years.
“We’re back to pre-pandemic levels in terms of credit card balances,” said Rossman. “And those who are carrying balances are carrying them for a longer period of time.”
In fact, among Americans who carry credit card debt from month to month, 60% have been revolving this debt for at least a year, according to CreditCards.com. This is up from 50% last year.
So, folks are still trying to pay off last Christmas, while adding debt from this Christmas. Even if they never spent another penny on those cards, making minimum payments it would take them 5-7 years to pay off credit card debt, all the while paying up interest as high as 23%.
The New Year is not looking bright.
Unless something dramatic happens to turn things around – and I have no idea what that might be – we’re looking at a grim 2023 for many households. We’ll be facing a full-blown recession.
A recession is a period of economic downturn that is characterized by a reduction in economic activity, such as a decrease in Gross Domestic Product (GDP) and an increase in unemployment. Recessions are typically accompanied by a decline in consumer spending and business investment, as well as other economic indicators.
During a recession, it is common for people to experience financial difficulties and may struggle to pay their bills or meet their basic needs. Some people may become unemployed or underemployed, which can lead to an increase in poverty and homelessness. It is also common for people to cut back on non-essential expenses, such as dining out or taking vacations, in order to save money. This, of course, means there’s even less money in the economy at large and there are even more people becoming unemployed as businesses suffer.
In terms of crime, it is difficult to make generalizations about how a recession may affect crime rates. Some studies have found that crime rates may increase during economic downturns, while others have found no correlation or even a decrease in crime during recessions. The relationship between crime and the economy is complex and may be influenced by a variety of factors, including unemployment, the availability of goods, and social and economic policies.
It’s my opinion that we will probably see an increase in property crime – after all, retailers have lost $100 billion to shoplifters since 2021. Alarmingly, much of that was due to organized retail crime such as flash mobs.
Buckle up!
I think that we’re in for a 2023 that makes 2008 and 2009 look easy. That doesn’t mean all is lost. Americans are resilient and we’ve nearly all experienced personal hard times. We need to tap into our preparedness and self-reliance skills to ride out this storm just like we would handle an act of nature.
What do you think about the increase in spending? Is it a good sign or a bad one? What do you see happening with the economy in 2023? Share your thoughts with us in the comments section below.
About Ashley
Ashley Allen Reade is part of a prepping family. She has spent her entire adult life getting prepared for one event or another. She enjoys traveling, gardening, and decorating.
Adding credit debt to credit debt is just digging yourself a hole unless ofcourse your debt is forgiven….
Praise be to the Creator for YOU, OP readers!
Most of you are facing reality.
Well, they would face it even better if they only knew and believed the TRUTH about this Dec. 25th holiday. WAS JESUS BORN ON DEC. 25TH? IS THAT HOLIDAY ABOUT JESUS OR ABOUT SANTA CLAUSE? If it’s about JESUS, then DID HE WANT US TO CELEBRATE HIS BIRTH? HOW MANY GIFTS DID JESUS RECEIVE AT HIS BIRTH FROM THE WISEMEN?(the only gifts He got) WERE THE SHEPHERDS REALLY OUT IN THE FIELDS KEEPING WATCH OVER THEIR FLOCK BY NITE IN THE COLD WINTER IN THE HOLY LAND? WHEN DID THEY PUT THEM AWAY AND BRING THE ANIMALS BACK OUT AGAIN? COULD IT BE A PAGAN HOLIDAY? WERE WE SUPPOSED TO PUT A TREE INSIDE OUR HOUSE? Ahhhh, you see if people knew these answers, then they would NOT even be celebrating this holiday b/c it’s FAKE, IT’S TRADITIONAL, IT’S ALL COMMERCIAL (about charging and living up to the lifestyles they can’t afford) It’s a worldly holiday with no real meaning. JESUS is NOT the reason for the season. SORRY, but it’s true …i.e., like credit card spending and DEBT that they have to pay next year all year long at least or longer. Hummm, they have to have so many gifts under the tree that it takes an hour or two (minimum) just to open them all up. Oh, my, It’s also a PAGAN HOLIDAY. JESUS told us DO NOT DO AS THE PAGANS DO, DO NOT CELEBRATE THEIR HOLIDAYS!!! So, the best thing to do to cut this foolish charging and spending like crazy and to learn the TRUTH about it. When they know the TRUTH, the truth will set them free. IF JESUS was here (the 25th is supposed to be about celebrating his birth), WOULD HE CELEBRATE IT ON THE 25TH! Well, to be honest, that is totally (a joke) …today it’s more about Santa bringing each child 15 presents or more…Anyway, EDUCATE YOURSELF AND LEARN. We are never to old to learn the TRUTH. And next year maybe you will know that it’s NOT what you think it is. Most won’t learn or even believe, and that is unfortunate. I celebrated it all of my life till 2010 and that was the last one for me. Think of the $$$$ I’ve saved. NO, I am a giver and NOT a taker, I am not a miser or selfish. I am NOT a scrooge, and I am NOT being a bah humbug or trying to be negative. I am trying (as a former teacher) and a woman that was married for 33 yrs. and a mother of two children and 5 grown grandkids to educate you into the knowledge of the TRUTH…GOD BLESS YOU!!! Oh, and P.S. JESUS was born at the Fall Feast b/c everything CHRIST did was focused on one of the feasts. It was at the end of September. Check it out! I have NO reason to lie to you…
You are absolutely correct. True Christians would never celebrate a Pagan holiday.
Get over it. Seriously most of life is 99% mundane with having to do this or that. Why do christians always have to try and ruin a holiday that should be a bright spot among all the drudgery of daily life? I bet you celebrated plenty of Christmases before you found your calling to educate people on your version of the truth. Maybe being pagan wasn’t so bad because at least you don’t have people trying to shame you into being miserable 365 days a year.
Here’s a news flash god and jesus don’t care if you celebrate his birthday. Spirits and supernatural beings don’t have birthdays nor do they care about the petty and nitpicking things that christians seem to care about. God couldn’t even be bothered to give human beings soap when he created them.
And you are right jesus is not the reason for the holiday season. If he was then ALL churches would be open on christmas day no matter which day of the week christmas fell on and christians would spend all day in church worshiping jesus and god and celebrating for his birthday. But they don’t. I wonder how y’all are going to spend eternity worshiping god and jesus when you can’t even reserve his full birthday for your worship and praise.
Just a little food for thought. Holidays should be about whatever you want and stop trying to making people feel guilty because they don’t celebrate the way you think they should be celebrating.
They can use whatever indexes they like to try and make it look better. Where I come from if inflation is up about 7% and spending was up 7% that’s pretty much zero. But we all know that they couldn’t report anything negative – that would be bad. The simple truth is that even if people spent the same as they did last year, they couldn’t afford it like they could last year. Between interest rates, and inflation, and higher taxes and higher everything, they are struggling more now than ever. So they put it on their cards and increase personal debt – which has to come to an end at some point. Be it people or governments, sooner or later the idea that you can spend your way out of debt has to come to an end. The idea that you can dig yourself out of a hole is STUPID! The first thing you need to do is quit digging!
Just on a different, but related topic. Inflation is caused by too much money in the system. The Fed has been aggressively raising interest rates to try and curb inflation. With their last 50 basis point rise in December it almost looked like inflation had at least plateaued, if not dropped. The financial markets were overjoyed that this might signal the end of QT. So what does the government do – passes an end of year bill pumping another 1.7 trillion dollars into the economy. More money which is the original cause of the inflation they’re trying to fight.
Is it just me, or is this the stupidest thing that they could have done.
TO the LONE CANADIAN…YOU know as well as I do that you can’t fix stupid. They spend b/c they want. They enjoy it, they get a high doing it (many do, it’s like a drug). They think pulling out the charge card is easier than spending cash. Some feel important b/c they have one to use. Many however are just MAXED OUT and when Jan. comes, they couldn’t charge is they needed or wanted to do so. Will they ever learn? Can they even learn? It’s pitiful but it is what it is as you say…NO IT’S NOT JUST YOU… it really absolutely is the most stupid thing they could do. BOTH: people spending to much and the government putting another 1.7 trillion into the economy that the taxpayers will have to support, it’s not just “STUPID” but it’s “INSANE” and they are ALL idiots…Looks like we’ll have to endure this sort of craziness till 2024. OMG.
Never forget that the Inflation percentage the “Government” says, is an artificially created number. It doesn’t reflect the actual percentage that everything across the board has increased in price. If the “powers (crooks) that be” say that it’s 8%, the reality is 3 to 4 times that, and in some cases, way more.
For example, Primers, used to load and reload ammunition have gone from roughly <$50/1000, up to $125-$160/1000. That's not an 8% increase in price. It's a 300% increase in price. Smokeless Powder has gone up 50-60%. Bullets, a 40-50% increase. This is just a few items, and a complete breakdown across common household items, shows an increase between 18 – 38%.
Gasoline went from $2.09/gal (in my area), up to $4.89/gal. That's not an 8 or 9% increase, it's more than twice the cost it was.
I don't need to listen to the economists with the highly manipulated figures. I feel the cost increase every time I open my wallet.
BEMUSED BESERKER: May I ask you is it not “GREED”????? I will give you a KUDOS for your statistics (the real numbers). and then an AMEN!!! Will it be any better in 2023? Ahhhh, pls. don’t hold your breath. Hope you got all the beans and rice you’ll need. Lots of water, whatever medicine you take, and anything else that will be beneficial to you…It’s NOT looking good. They will scream HAPPY NEW YEAR, but they don’t have any idea what’s ahead!!! Most just live for today and don’t think about tomorrow. I’m kinda wondering what happen to good old common sense! It’s hard to find anymore, just like justice, it went out to years ago…
Where I am, meat prices are up 20%. Houses/rents have doubled in price or more in some cases. I’m sure medical care is through the roof as well, and that’s if one can get an appointment. Government pandemic relief ended over one year ago and I raise a skeptical eye to the idea that low income households are only now running out of savings from there. In my state, several municipalities including mine revalued all properties, resulting in property tax increases of 20-30%+. Those COLA raises public servants receive are considered mandated expenses and inflation is hitting city services as well. The local utility company was recently granted a 9% rate increase (they asked for 14) despite making record profits last year.
With respect to maintaining the old lifestyle in the new economy via credit card, IMO that’s poor decision making and not my problem. Perhaps these people should simplify their lives and cut up those cards, preferably long before filing bankruptcy. Putting food and gas to get to work on plastic is bad enough but understandable. Putting Christmas on it is just plain wrong thinking.
JAYNE, nobody told us that “stupid” can be fixed. Sorry…I do wish it could. Have a good New Year despite all of this mess we’re finding ourselves in thanks to the big cheese in Washington!
I realized 20 years ago, that credit cards are the tool of the Devil, himself. I worked hard to get everything paid off. Be debt free. It is such a GLORIOUS feeling! My newest car is a 2013 truck. Before that, a 2006 Honda Element.
I bought 3 bags of cat food today, 12 lbs. for $57.00, Filled up my truck for $70 some dollars, bought some cigs and beer, $250. HOLY SCHNIEKIE! I used to joke that $100 is the new $20. I don’t joke anymore. Dog food is CRAZY expensive? $200 for a few wet cases and dry bags. THANK GOD I have everything paid off. I don’t see how people do it. It’s insane. I haven’t owned a credit card in over 20 years. Co-workers bitch and moan. They are barely making ends meet. I don’t know if I will be able to retire, with a good pension if this keeps up? This house of cards will fall soon. And fall hard.
Wait, What? I thought Joe Biden said we are NOT in a recession. He’s not in a recession but the rest of us suffer. We did not do gifts this year so as not to go into debt, we spent time together with our family, went hiking at a nice nature reserve, and watched movies while grilling hamburgers. It was a great day.
Wait until next year when energy prices start going through the roof!