It’s the most wonderfully expensive time of the year, and people are expecting to spend big.
A new survey from MassMutual shows that consumers are feeling optimistic about their finances — and are planning to spend $1,243 on average on holiday-related purchases this season. For comparison, the national median rent was $1,312 in October, according to a report from Apartment List.
The MassMutual Consumer Spending & Saving Index surveyed 1,000 U.S. adults online between Oct. 18 and Oct. 22, 2021.
The survey found that despite record-high inflation, 73% of Americans said they’re feeling optimistic about their finances. Thirty-five percent said they’re feeling “very optimistic” about their finances, up from 27% in July and 21% in February.
“Inflation will likely hit certain groups harder than others — such as retirees, those on fixed incomes and lower income households. That said, I do feel that many have more discretionary cash and feel more confident, despite an increase in inflation,” Paul LaPiana, a certified financial planner and head of product at MassMutual, told MarketWatch via email.
Most Americans were able to save money during the pandemic, and therefore have cash to spend now. MassMutual found that 35% of respondents saved more than $1,000 over the last three months.
Retail sales already surged last month by 1.7%, the U.S. Census Bureau said Tuesday. And the National Retail Federation has forecast record high spending this holiday season — with sales for November and December expected to reach between $843.4 billion and $859 billion.
MassMutual found that 42% of U.S. adults plan to spend at least $500 more this holiday season than in 2020, and a quarter expect to spend at least $1,000 more this year.
Similarly, Deloitte’s latest holiday retail survey projected that households will spend an average of $1,463 this holiday season, up 5% compared to last year. Nearly all of the gains will come from upper-income households, the Deloitte report noted. “[T]here is a tale of two holiday seasons, with higher-income households planning to spend five times that of lower-income households,” the Deloitte report said.
While nearly half plan to use money they’ve set aside specifically for holiday spending, an increase in spending could worsen debt for some, the MassMutual survey found. Of those who plan on using credit cards to pay for holiday spending, 59% say they will not be able to pay off holiday debt for at least six months.
Thirteen percent of consumers are still paying off holiday debt they racked up last year, a LendingTree survey found, and 41% expect to go into debt paying for this holiday season.
And while most people did their holiday shopping online last year due to the pandemic, 29% said they will shop in-store this year. More than a quarter of consumers said they will shop exclusively in person to avoid delivery delays.
People also expect to spend more on holiday travel expenses (34%), attending and hosting in-person holiday celebrations (34%) and “big ticket experiences,” such as shows, concerts or sporting events (23%).
While increased spending signals a continued economic recovery, consumer sentiment hit its lowest level in a decade in November as inflation expectations hit a 13-year high.
Still, people are feeling more optimistic overall, LaPiana said, which suggests we’ll see continued momentum in the economy.