The winter holiday shopping season is in full swing—and has been for many since fall began. The basic theme remains the same: Shoppers will feverishly continue to try to find the perfect meaningful gifts for everyone on their list.
From the shopping frenzies of Black Friday and Cyber Monday to the last-minute sales just before the actual holidays happen, the American commercialization of the holidays plays a big part in how much the average American pays for all their holiday expenses over Thanksgiving, Christmas, Hanukkah, and Kwanzaa.
With gifts, parties, and decorations, the holiday season in America seems to be getting more and more extravagant (and expensive). Below is a look at the average cost of the American holiday season and why the cost is steadily rising.
- Nearly every year since 2009, American consumer spending on holiday gifts and other holiday expenses has increased over the previous year.
- There will be no increase in planned spending for 2021 since Americans, on average, expect to spend $998 on gifts, holiday items, and other expenses—roughly the same as 2020.
- Overall spending over the holidays, however, is expected to register the largest single-year increase on record: 8.5% to 10.5%.
- Over the past decade, ecommerce has captured an increasing percentage of holiday spending.
- As America begins to emerge from the restrictions of 2020, holiday travel is expected to reach pre-pandemic levels, although not evenly across income levels.
Planned Winter Holiday Spending for 2021
According to data provided by the National Retail Federation (NRF), Americans plan to spend roughly $998 on gifts, food, and decorations in 2021, the same amount that they planned to spend in 2020.
Planned holiday spending breaks down to $648 on gifts for family, friends, and co-workers; $231 on non-gift holiday items, including food and decorations; and $118 on other non-gift items for self or family.
A significant chunk of that spending will be online, according to the NRF, which expects online and other non-store sales to increase 11% to 15% ($218.3 billion to $226.2 billion), up from $196.7 billion in 2020.
Average amount that consumers expect to spend on winter holidays in 2021.
It Gets Complicated
Looking at the numbers above, it’s clear that consumers plan to spend about the same on the winter holidays for 2021 vs. 2020. Nevertheless, the NRF projects that overall holiday sales will grow 8.5% to 10.5%. How can both things be true?
The NRF projects retail sales over the holidays (Nov. 1 through Dec. 31) including “traditional holiday purchases but also items not specifically for holiday celebrations.” Separately, the NRF surveys consumers on planned holiday spending only. Simply put, while consumers plan to spend the same on holiday expenses, they are expected to spend more overall during the holiday season.
An Upward Trend Since 2010 (Almost)
In 2010, Americans planned to spend an average of $831 on the winter holidays. This year’s average of $998 represents a 17% increase over a little more than a decade, or an average increase of 1.5% per year. Inflation, which has averaged 2.1% over the same period, accounts for some—but not all—of the long-term increase. Such may not be the case, however, for 2021 considering this year’s high inflation rate averaging 4.3% through October, when the rate for that month hit 6.2%. Actual retail holiday period sales, including non-holiday purchases, have averaged 5% growth per year, according to the NRF.
Even with a leveling off in planned holiday spending for 2021, the combination of an unusually high inflation rate with the fact that Americans tend to spend more than planned with almost every new holiday season anyway makes it likely that total actual spending will be higher than usual.
The Cost of COVID-19
No holiday season in recent memory has had to factor in the impact of a pandemic on the cost of decorating, giving, and celebrating. And yet, here we are with planned holiday spending leveling off while overall holiday period spending is expected to be up as much as 10.5%, beating the 5% average annual increase in spending over the past decade.
“Consumers … are spending because they can.” — National Retail Federation (NRF) Chief Economist Jack Kleinhenz
While the impact of the COVID-19 pandemic will be a key factor in 2021 retail sales, the overall forecast is positive. “There are several factors coming together to have a major impact on the holiday outlook, but household fundamentals are a bright spot in the uncertain present,” said NRF Chief Economist Jack Kleinhenz in a statement. “Consumers are in a very favorable position going into the last months of the year and are spending because they can.”
The Effect of Income on Travel Plans
Without question, fewer Americans traveled during the holidays last year compared to 2019. According to Statista, the number of holiday travelers in 2020 dropped to 84.5 million vs. nearly 119 million the year before.
According to The Vacationer’s 2021 Holiday Travel survey, nearly 161 million Americans plan to travel this holiday season, a nearly 92% increase over 2020. A survey by Deloitte discovered that 2021 travel intentions are bifurcated by income. For example, one in four lower- and mid-income travelers plan to pull back on their travel budgets, citing finances as the main reason. Higher-income people are twice as likely to increase their travel spending this year.
The Bottom Line
Americans’ actual spending has increased each holiday season since 2010, and that tradition is expected to continue in 2021. While shoppers are more cautious when it comes to their planned holiday-specific spending, overall holiday spending is expected to jump as much as 10.5%—the largest single-year increase since at least 2002. The normal tendency to spend more than planned will likely be exacerbated by this year’s higher-than-normal inflation rate.
That said, the economic realities of 2020 are expected to shift priorities for low- to moderate-income households, resulting in less spending on travel over the holidays than before the pandemic. Fear of COVID-19 does not seem to be as much of a factor as finances are. Of course, we won’t know how much people actually spent until the holiday season is over. Stay tuned.