As the holiday season approaches, a new report from PYMT and LendingClub, “New Reality Check: The Paycheck-to-Paycheck Ratio – The In-Depth Holiday Shopping Edition,” released in November 2023, paints a detailed picture of the impact of economic challenges on consumer spending in the United States.
The report, based on a survey of 3,640 U.S. consumers, reveals a significant change in holiday shopping behaviorsinfluenced by the trend of continuing to live paycheck to paycheck.
Prudent spending despite financial constraints
Despite a slowdown inflation in 2023, the report indicates that 60% of consumers continue to live paycheck to paycheck, with 19% struggling to pay their monthly bills. This financial pressure is not limited to low-income groups; a notable proportion of people with high incomes also fall into this category. Consequently, there is a notable decrease in the number of consumers planning to make holiday purchases compared to the previous year.
Reduced dependence on credit
Unlike previous years, consumers are less likely to finance their holiday purchases on credit. Only 13% of vacation expenses should be financed by credit, a marked decrease. This trend is more pronounced among people facing financial difficulties, although their use of credit is also declining.
Savings rather than credit: a new trend
An interesting development is the increased reliance on savings for vacation expenses. More than a third of consumers, especially among younger generations like Gen Z, plan to use their savings for Christmas shopping. Some of these consumers could deplete a significant portion, or even all, of their savings, indicating a move towards immediate spending on long-term financial security.
Buy now, pay later gains traction
The report also highlights a growing interest in Buy Now, Pay Later (BNPL) services, particularly among younger consumers and those facing financial constraints. This reflects a broader shift in consumer financing preferences and the evolving personal credit landscape.
Various payment strategies
Consumers’ holiday payment decisions are varied and influenced by their financial situation. The combination of savings, credit and other financing options reflects a nuanced approach to managing limited financial resources, with younger generations more likely to combine these methods.
A reflection of broader economic trends
The “New Reality Check” report paints a picture of the broader economic challenges facing U.S. consumers. The conservative approach to holiday spending, diverse financing strategies, and reliance on savings rather than credit highlight the ongoing impact of economic conditions on individual financial behaviors.
As we enter the holiday season, these trends shed light on the financial realities of American consumers and the evolving consumer’s behavior.