Inflation set to spoil holidays for struggling U.S. families
Retailers are forecasting a record holiday spending season. But for one in ten Americans, prices rising at the fastest pace in 30 years will dampen the Christmas spirit.
Inflation is especially taking a toll on lower-income families, who spend roughly a third of their earnings on essentials like food and energy. It’s eating into recent wage increases, and the timing couldn’t be worse after federal pandemic relief expired for about 7.5 million people.
“Anything that in the very short run puts a lot of pressure on family budgets across the board will cause more stress and damage to low-income households because they just have less scope to absorb it,” said Josh Bivens, director of research for the Economic Policy Institute.
The holiday season will lay bare inequalities in the economic recovery. That’s because a majority of Americans flush with over $2 trillion in excess savings accumulated during the pandemic are ready to splurge on gifts and holiday trips.
At the same time, more than 11% of Americans don’t plan to spend at all, the greatest share in at least 10 years and more than double that in 2020, according to a Deloitte LLP survey. And the Salvation Army is bracing for a holiday season similar to that after the 2008 financial crisis, according to National Commander Kenneth Hodder.
A report Tuesday is expected to show U.S. retail sales advanced 1.5% in October from the prior month, which would be the most since March, according to estimates as of Monday’s market close. However, the data aren’t adjusted for inflation, and economists expect that price increases will hurt consumer demand in the near term.
Inflation has become a political lightning rod, deployed by senators like Joe Manchin, a moderate Democrat from West Virginia, to put the brakes on President Joe Biden’s proposed $1.75 trillion socialspending package.