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The Cost of Christmas

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December 7, 2012

If you turn on the television or walk into a store, you are inundated with all the glittery packages, discounts, and holiday sales. The spirit of “giving” seems to be the one that most stores focus on for the holidays and rightfully so for their pocketbooks. In fact, you may be surprised at exactly how much Americans spend, on average, for the Christmas gift shopping.

In a recent Gallup poll, they found that the average American will spend $770 on Christmas presents this year. 

For many families, $770 is a very large sum of money. However, for some $770 is just a drop in the bucket of their holiday spending sprees. In fact, 30% of respondents said that they have or will spend over $1000 on Christmas shopping this year. Regardless of income, it seems that giving gifts is something that most families plan on doing. Only 6% of respondents said they will not be purchasing holiday gifts this year.

Though the thought of spending $770 on Christmas presents may seem crazy to some, the holiday shopping season and forecasts are typically a really good indicator of the state of the economy. The more stable the economy and financial outlook, the more willing consumers are to spend more money for the holidays. The less secure consumers feel in the economy the less they spend.

So how does this year stack up compared to recent years? This year is actually on a decline. If you look at the graph from the study you can see that 2008 was a rough year for holiday shopping and consumer purchases dropped significantly from 2007. This was due to the financial crisis of 2008 with fear of uncertainty within the economy and declines in wages. However, rebound came and spending  rose sharply in 2009 and then slightly in 2010, but dropped off in 2011 and declined again approximately 1% this year. What does this say about the consumer?

Most economists agree this year will not hold any surprises for retailers. Sales will be on target for most markets and according to the Commerce Department, consumer spending in 2012 has been up each month over 2011 levels, but by modest amounts at best, and it looks like holiday shopping will maintain that pattern, providing a 3.5% to 3.7% increase in sales. This is very important since the nation’s retailers typically need a strong Christmas shopping season to help them meet their revenue goals, and, in terms of the planning that goes into inventory and hiring, it is always better to be prepared for a slow year than unpleasantly surprised by one.  With shopping relatively on target, most retailers are not going to be surprised by the holiday retail numbers.

Does this poll surprise you? Do you think a $770 average holiday budget is reasonable, over-the-top, or not enough?

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