Americans plan to spend big this holiday season even as they fret about the economy, Visa finds

As the holiday season approaches, Americans are gearing up to open their wallets and increase their gift budgets, despite economic challenges such as a slowing job market and rising inflation. According to a recent analysis from Visa Business and Economic Insights, U.S. consumers are expected to spend an average of $736 each on holiday gifts, representing a 10% increase from the previous year’s average of $669.

This projected sales growth can be partly attributed to inflation, with prices rising by 3% on an annual basis in September. Additionally, older consumers, particularly baby boomers, are forecasted to increase their holiday spending by 21%, further contributing to the overall increase in holiday spending.

Despite concerns about the economy and consumer confidence surveys painting a cautious picture, consumers are demonstrating resilience and a willingness to spend. Michael Brown, a principal U.S. economist at Visa, noted that consumers are spending more robustly than sentiment and confidence data may suggest.

Visa’s holiday spending projections were based on retail sales data from the U.S. Department of Commerce, excluding automobiles, gas stations, and restaurants. The analysis revealed that the correlation between changes in consumer spending and consumer sentiment has weakened in recent years, with spending continuing to rise even as sentiment declines.

While consumer sentiment has been declining due to concerns about the job market and inflation, steady wage gains have helped support consumer spending. Many Americans are still willing to shop despite higher prices because their take-home pay remains strong.

Other holiday outlook forecasts from organizations like Adobe for Business and Gallup echo Visa’s findings, indicating that Americans are planning to spend significantly on holiday gifts, travel, and food. However, lower- and middle-income households may face challenges this holiday season as higher costs for essentials like groceries leave them with less discretionary income.

Despite the overall increase in holiday spending, some consumers are being cautious in their purchases, trying to make their dollars stretch further. Brown emphasized the importance of balancing necessities with discretionary spending, especially given the higher costs for essential items this season.