Thanksgiving set to launch record spending for inflation-weary Americans in 2024

Holiday spending is expected to reach record levels this year, with Americans laying out nearly $1,000 per person over the year’s final two months, even as inflation and cost-of-living pressures continue to weigh on consumer sentiment.

The record spending forecast belies one of the more consistent messages from voters throughout the autumn election campaign: deep frustration with the state of the economy, the price of ordinary consumer goods, and the perceived lack of focus on those issues from the Biden administration.

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In fact, around 75% of voters in exit polls published by CBS said inflation had caused “moderate or severe” hardship over the past year, with nearly half saying they were worse off, in financial terms, than they were four years ago.

Consumer-price inflation has fallen sharply since its July 2022 peak of 9.1%, and was last pegged at an annual rate of 2.6%, according to the most recent data from the Commerce Department. 

Inflation was a central issue in the 2024 presidential election. But over the holiday period consumers are set to defy that issue with record spending.

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“It is much easier for presidential candidates to promise to end inflation than it is for sitting presidents to actually do so,” said David Steinberg, associate professor of international political economy at the Johns Hopkins School of Advanced International Studies. 

“Elections are never decided by one factor alone, but inflation is one factor that helped Donald Trump win the 2024 presidential election,” he added.

The average cost of Thanksgiving falls, but it’s still pricey

A resilient job market, however, has provided Americans with ample spending power.

Wages have broadly outpaced inflation for much of the past two years, although the cumulative price increases stoked by shortfalls during the pandemic remain significant. 

Food costs, for example, are notably higher than they were prepandemic. But they are abating amid a broader cost-of-living decline, which was partly prompted by the Federal Reserve’s interest rate increases and the government’s economic strategy.

The Farm Bureau’s annual estimate of the cost of a traditional Thanksgiving meal, which includes a turkey and various side dishes, is $58.08, about 5% less than it was last year. 

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“Two years of declines don’t erase dramatic increases that led to a record high cost of $64.06 in 2022,” the Farm Bureau said. “Despite the encouraging momentum, a Thanksgiving meal is still 19% higher than it was in 2019, which highlights the impact inflation has had on food prices — and farmers’ costs — since the pandemic.”

Still, Americans look set to dig deep into their wallets during the holiday season, which, in retail terms, typically begins on Nov. 1 and ends on either Christmas or New Year’s Eve.

Mastercard’s SpendingPulse, one of the broadest measures of consumer spending over the holiday period ending on Christmas Eve, has forecast that overall online and in-store spending will rise 3.2% from last year. 

Record retail holiday spending forecast for 2024

The National Retail Federation, meanwhile, sees spending rising to a record $902 per person over the two months ending on New Year’s Eve, with the overall 2024 tally rising 3.8% from last year’s total of $964.4 billion.

“The winter holidays are a treasured time for Americans, and they are prioritizing spending on family this holiday season,” the trade group’s vice president of industry and consumer insights, Katherine Cullen, said in a statement.

“Despite the shorter window of time between Thanksgiving and Christmas, retailers are prepared to meet the needs of consumers by providing holiday shoppers with earlier deals and sales and by ensuring inventory is available for the most in-demand items this year.”

However, holiday-spending outlooks from the nation’s biggest retailers have been mixed. The underlying signals suggest consumers will be far more price-conscious than in previous years. 

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Last week, Walmart  (WMT)  boosted its full-year sales forecast and profit target following a better-than-expected October quarter update. The world’s largest retailer added that “the majority of our customers are maintaining their holiday plans year over year amidst the election, the calendar shift, and the economic backdrop.”

Target TGT cautioned, “Consumers tell us their budgets remain stretched, and they’re shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation.”

Last week, Target issued muted holiday sales and profit forecasts and said it was planning further discounts on food, toys, and clothing to capture market share lost to its larger rival. 

Thanksgiving travel boom in focus

One area of the economy that is likely to perform well over the holiday season, however, is travel, although discounting and capacity issues are still likely to weigh on the profits of the biggest air carriers, such as Delta Air Lines  (DAL)  and American Airlines  (AAL) .

“The improved unit revenue trends we saw in the month of September are continuing into the December quarter with healthy bookings for the holiday,” Delta told investors last month. 

The Transportation Security Administration said it expected to screen more than 18 million passengers over the seven-day period that begins on Thanksgiving. That record total could include a new single-day peak of more than 3 million on Thanksgiving Sunday.

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The cheapest gas prices in more than three years, with a national average that could fall below $3 per gallon, will also allow more Americans to travel by car, according to the AAA motor club.

Related: Getting on the road for Thanksgiving will be cheaper this year

The group now forecasts that around 80 million people will travel 50 miles or more over the seven-day stretch that runs to Monday, Dec. 2.

“We’re just pennies away from the national average falling to $2.99, but for a third year, we may again fall short,” said Patrick de Haan at consumer advocate Gasbuddy.

“As Americans prepare to hit the road for Thanksgiving, we’re seeing the lowest national average price of gasoline since 2021, with a far better economic picture than when gas prices were last this low,” he added.

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