The holiday season, a time traditionally marked by joy and gift-giving, is undergoing a transformation in the face of continued inflation. According to msn.com, a recent Monmouth University poll reveals that 55% of respondents plan to reduce holiday spending this year due to high prices. This shift can introduce volatility in the Consumer Price Index (CPI), a monthly indicator of the average change over time in prices paid by consumers for a basket of consumer goods and services, and challenge assumptions about consumer purchasing behavior. As indicated in the Monmouth poll, general sentiment suggests prices are soaring and therefore consumers are spending less this year. However, do prices really continue to soar?
i360’s data science team has been evaluating data from January 2014 to the present for several typical holiday gift items. Contrary to popular belief, not all prices seem to be on the rise. It’s evident that different product categories have experienced varied trajectories. For example, the decline in television prices, adjusted through hedonic pricing (a pricing model that considers both internal and external factors when determining the price of a good), reflects factors like increased screen sizes, influencing the apparent price. According to the chart below, based on data from the CPI index over time, several of the categories are slowly declining, with some categories, like toys and audio equipment, consistently declining.
Even though consumer spending habits may change depending on prices, in reviewing year over year (YOY) pricing changes, this year, the data points show very little increase in common holiday gift purchases. For some gifts, like toys, the price has actually decreased by 2.75% since last year.
As we navigate the holiday season, through inflation uncertainties and amidst economic changes, i360’s US Inflation Forecasting data analysts do not anticipate a major shift in consumer’s gift purchasing behavior given the factors outlined above. This is an instance where the market pricing data and general sentiment may be misaligned.
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Disclosure: The information in these blog posts, based on i360’s US Inflation Forecasting, is for informational purposes only and should not be construed as investment advice on any matter.