Inflation and Economic Uncertainty to Dampen Holiday Spending: Deloitte Forecasts an 11% Decrease in Purchases

Inflation and economic uncertainty will dampen holiday spending, estimates Deloitte, which forecasts an 11% drop in purchases during this crucial period for businesses.

The fifth edition of the annual Deloitte Holiday Shopping Survey, conducted among more than 1,000 consumers from across Canada, of various age groups and financial situations, reveals that two-thirds of respondents (67%) are concerned about the possibility of a recession, 55% about their rent or mortgage increasing and 33% about money that should be spent on gifts.

“Although inflationary pressures have recently remained stable, the looming period of slowing economic growth should generate enough downward pressure for the Bank of Canada to maintain the status quo,” explains the chief economist at Deloitte , Dawn Desjardins. While this won’t provide relief to consumers during the holiday season, the prospect of an interest rate cut in mid-2024 bodes well for the economy’s recovery next year.”

This translates into an estimate of average purchases of $1,347, or an 11% decrease in total purchases during the holiday season. We note in particular a decrease in gifts (-18%), gift cards (-14%) and charitable donations (-40%). The only expected increase is in travel-related spending, which is expected to increase by 11%.

“Canadian consumers plan to reduce their spending and make the most of their holiday budget, devoting more effort to shopping in stores and online, in search of better gifts and the best value for money,” emphasizes Deloitte in its survey.

Sustainable products

However, sustainable development remains a concern for consumers, even if it means paying more for certain items. More than half of respondents (55%) say they are willing to pay a premium for products certified to comply with ESG (environmental, social and governance) standards.

Nearly half of respondents (45%) also plan to purchase sustainable gifts for certain types of products, while 37% will choose sustainable or responsibly sourced gifts wherever possible. A quarter of people (25%) will try to purchase used items to reduce their environmental footprint.

Be better positioned

These changes to consumer behaviors mean retailers will need to re-examine and refine their value proposition to stand out, Deloitte believes.

Price is an important element, particularly this year, but it is not the only one, adds the consulting firm. Product availability, shopping experience, speed of checkout, free delivery and ease of returns are all opportunities for retailers to stand out.

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