Some Long Islanders said they're changing their holiday spending amid economic woes. "Inflation is absolutely devastating my family," one said. NewsdayTV's Cecilia Dowd reports. Credit: Newsday/James Carbone

Shoppers will be more cautious about gift-buying this holiday season as high inflation and worries about a possible recession cut into their spending plans, retail experts said.

Many of those who choose to shop in stores and/or online between Thanksgiving and Cyber Monday, considered the unofficial  kickoff of the holiday shopping season, will be hunting for bargains or trading down to cheaper brands, experts said.

With well-publicized reports of retailers, such as Kohl’s, Walmart and Target, having abnormally high amounts of inventory, some shoppers will be waiting it out.

“I suspect that a lot of people realize that because the economy is slower than it was last year, that they can probably wait and they’ll get some good bargains later in the season,” said David Swartz, equity analyst in the consumer sector research group at Morningstar Investment Service in Chicago.

What to know

  • Inflation and economic worries may cool consumer demand.
  • Some shoppers may bide their time, betting on steeper discounting in the weeks ahead.
  • Analysts differ on whether retailers will see real sales growth, beyond the inflation rate.

West Babylon resident John Bocca might shop on Black Friday if he catches some good deals, the father of a 12-year-old daughter said Tuesday outside a Target store in Copiague.

But with his living expenses rising steeply — his rent tripled when he and his girlfriend relocated in October — their Christmas gift-giving will be reduced, he said.

“We absolutely talked about how everything will be cut back and scaled back a little bit because we can’t have the elaborate Christmas that we’ve had in years past. Just money is very tight and we have to watch our budget,” said Bocca, 41, a sales vendor for a paint company.

Copiague resident Jose Argueta, 49, will visit Roosevelt Field mall in Garden City and Walt Whitman Shops in Huntington Station on Black Friday but he will buy fewer gifts than usual, he said.

He already has told his family, including his five children and eight grandchildren, that he’ll be cutting back.

“It’s not going to be like it used to be. … Everybody [is] hustling, like we don’t make enough money in our jobs,” said Argueta, a restaurant server.

While the five days from Thanksgiving to Cyber Monday are still regarded as an indicator for how retailers will fare over the whole holiday season, the period continues to lose its significance, partly because retailers are offering deals earlier.

Total sales during this holiday season — November and December — are expected to grow 4.5% compared with the same period in 2021, which is in line with the average of the past 20 years, according to S&P Global Ratings. 

But much of this holiday season’s sales growth is tied to inflation, the Manhattan-based financial analysis company said.

Adjusted for inflation, holiday sales actually will contract as consumers allocate more of their spending for essentials, according to S&P.

“There’s going to be fewer literal things under the Christmas tree even though [shoppers] … have spent more dollars, because things are just more expensive today than they were a year ago,” said Sarah Wyeth, retail sector lead at S&P.

Other sales projections are more optimistic.

The National Retail Federation's "expectation is that we will have real, inflation-adjusted, growth for the holiday season," said Danielle Inman, spokeswoman for the Washington, D.C.-based trade group.

The federation is forecasting that holiday sales will grow between 6% and 8% to between $942.6 billion and $960.4 billion compared with the same period last year.

In 2021, holiday sales grew to 13.5% over 2020 and totaled a record-breaking $889.3 billion, but much of that performance was due to the recovery from the COVID-19 pandemic’s weak sales in the 2020 holiday season.

“It was a bit of an anomaly last year. This year is going to be tougher … certainly for department stores, which, in the U.S., have been on the decline for many years,” Swartz said.

Record discounts online

Even online sales will take a different turn this year.

Online discounts will reach a record high, an average of 32% off, but total online sales growth is expected to grow only 2.5% to $209.7 billion, according to Adobe Analytics. It will be the smallest growth increase for the season since Adobe started tracking the data in 2012.

“The 2.5% [year-over-year growth] is considered a softer spending environment, driven by factors including persistent inflation offline, rising rates/cost of borrowing, and an expected return to in-store shopping” as pandemic-related anxieties subside, said Vivek Pandya, lead analyst from Adobe Digital Insights, in a statement.

The national inflation rate in October was 7.8%, the highest for the month since 1981, according to the U.S. Bureau of Labor Statistics.

The average cost of groceries, or what the bureau refers to as "food at home," was 12.4% higher in October than the cost a year earlier. It was the highest year-over-year inflation for October since 1978.

So — since consumers will be focused on necessities — gas stations, grocery stores and restaurants will be among the sales winners this holiday season, said Scott Hoyt, senior director of consumer economics at Moody’s Analytics in West Chester, Pennsylvania.

Other retail winners this holiday season will be discounters, including off-price stores, and other value-oriented “retailers that cater more toward essential needs,” said Zain Akbari, an equity analyst at Morningstar.

But don’t count high-end retailers out.

Luxury products, such as high-end purses and cosmetics, has been outperforming the broader retail market and will continue to do so throughout the rest of the year, as higher-income consumers aren’t letting the high prices of gas and groceries affect their shopping habits, Swartz said.

“Higher-end consumers continue to spend at good rates,” he said.

With Cecilia Dowd

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