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Inflation is easing, but will it trickle down to Christmas budgets?

Inflation is easing, but will it trickle down to Christmas budgets?
Inflation is easing, but will it trickle down to Christmas budgets?

Inflation in Australia rose by 5.2% in the last year until August, while in the US, it accelerated to 3.7% over the same period. 

But in the last month, the inflation rate has been easing, giving experts the impression that it’s well past its peak. 

Some economists believe the tight cycle is over, and inflation is becoming more stable and consistent worldwide. 

However, it’s unclear how consumers will respond and how it will affect their budgets this festive season. 

Retailers are already preparing for the peak season, while shippers’ holiday price hikes will kick in from next month. 

A jolly Christmas for retailers

Meghann Martindale, head of retail research at Madison Marquette, says the softening of the persistent inflation is a move in the right direction. “When you look back to June 2022, we hit our peak inflation rate. We’re now in a full two years of seeing how that inflation impact has reflected in sales. Going into the holidays, the good news is we’re feeling some ease with the (inflation),” says Martindale, speaking at an online webinar hosted by Industry Dive.

She says the consistently high inflation rate has dramatically shifted how consumers spend their money. It’s impacted shopping habits.”(Consumers are) more budget-conscious this year. Still very much in the spirit of gifting, probably less self-gifting. We see consumers always buy one-for-me, one-for-you mentality when the deals and promos hit during the holidays. But being mindful of spending, mindful of budgets, looking for those deals, looking for those promotions.”

She says consumers tend to break away from their tight budgets during the festive season. “We are seeing people travel a lot more now too,” Martindale even projects that more people will travel this December than before. This will trigger sales in other parts of the world. “It feels like, despite some lingering inflation, it’s the first normal holiday season since back in 2019. There will be spending and some shifts in how people spend their dollars. We’ll still see some budget limitations, but it won’t deter spending.”

Tight budgets at home

Shopify recently released a report on consumer behavior. It found that for 34% of consumers surveyed, value for money was the most crucial factor when choosing what to buy. 

Amazon Australia’s Janet Menzies says the cost pressures are hitting home. “Australians are increasingly responding by shopping online and offline in search of value and convenience.”

Half of Australians browse products online before buying in-store at a much cheaper price.

About the author

Mia is a multi-award-winning journalist. She has more than 14 years of experience in mainstream media. She's covered many historic moments that happened in Africa and internationally. She has a strong focus on human interest stories, to bring her readers and viewers closer to the topics at hand.

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