Cost of living continues to hit Christmas spending
After another year of rampant inflation, more than one-third of Britain’s consumers are planning on downsizing their Christmas spending on gifts. The same portion are planning to spend less on groceries, and on dining out during the festive period.
The Christmas trading period is often a key component to retailers’ financial year. Traditionally, consumers are willing to spend more than they do during the rest of the year, purchasing presents, food, decorations, trees, and more throughout the festive season.
But as consumers adjust to the current economic climate, a new study from KPMG has found that one-third of shoppers intend to spend less this year.
While that is a lower rate than polling going into last festive period suggested, there is a chance that a large number of the two-fifths of consumers spending ‘the same’ already shrank their Yuletide budgets in 2022.
Thinking ahead to Christmas, it seems that customers will be most ruthless with cuts to their gift budget this year. A 39% portion of shoppers said their budget was smaller for 2023, while just 4% indicated they would spend more.
When it came to food and drink, meanwhile, 34% indicated that they would spend less on food and drink groceries, and 35% said they would downsize their spending when it comes to eating and drinking in bars and restaurants. While that last category had a sizeable 14% who responded the question was ‘not applicable’ as they did not dine out last Christmas, even if it is assumed they will all return to venues this year, that is still a sizeable reduction in spending for a sector which has struggled to recover from the pandemic.
Responding to the findings, Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, commented, “Unsurprisingly, the higher cost of living looks set to take its toll on Christmas spending for many households. Four in ten consumers told us that their gift buying budget will fall this year, whilst a third said they will spend less on festive groceries and do less eating and drinking out.”
“The largest percentages of people said that their spending will remain the same this year, but only small amounts of households said that they were in the position to spend more this Christmas. Even for those spending the same – the volumes that they receive may well be less due to inflation.”
Even as consumers scale back their spending on Christmas amid a cost-of-living crisis, however, Millennial and Gen Z shoppers are helping inflate the annual revenues of the country’s Halloween economy. New research suggests that spending on the ancient pagan celebration will pass £1 billion for the first time in 2023.