• Shoppers are ready to spend this holiday season, but many are still budget-conscious.
• Lower inflation – and even deflation – gives some shoppers more money to spend on gifts and parties.
• Others might go into debt to make their vacation dreams come true.

Buyers seem ready to spend this amount holiday seasonbut there are many who have not yet given up looking for good deals.

Many signals suggest that some shoppers are feeling less financially stuck as the biggest shopping season of the year gathers pace. US retail sales for October was slightly higher than expected, and prices for many items — including the gifts themselves and many essentials, like gasoline — are increasing at their lowest rates in several years.

But customers still remember prices being lower four or five years ago, Claire Tassin, a retail and e-commerce analyst at Morning Consult, told Business Insider. As such, many are looking for bargains, as they have been for much of this year, while still spending for the holiday season.

“There is always this desire to find less expensive alternatives when possible,” Tassin said.

Retailers and consumer brands reported this summer that shoppers, even the most affluent, were reduce their expenses because prices remained high.

However, many consumers have not stopped yet. Instead, they tried to get more bang for their buck – think buying clothes at a discount store like Nordstrom Support instead of a department store retailer, for example.

According to a Bank of America Institute report released last week, there are signs that consumer conditions have improved since then.

The University of Michigan’s consumer confidence index has been up slightly since July. In October, the measure reached its highest level since April. Credit card spending in states hit by Hurricanes Helene and Milton rebounded in the weeks following the October storms, the report said.

And in recent months, inflation has slowed on some essential goods, like groceries, and even turned into deflation for others, like gasoline, according to the report. Theoretically, this means shoppers have more money to spend on discretionary purchases, like eating out and buying gifts.

“Is the apparent strengthening of consumer spending temporary? Potentially, but there are reasons for optimism,” the report said.

Friday’s retail sales growth showed “a good step forward in the holiday shopping season,” said Jack Kleinhenz, chief economist for the National Retail Federation. Sales rose 0.4% on a seasonally adjusted basis year over year in October, according to the U.S. Census Bureau. The Bureau also revised its September turnover upwards.

“Lower energy prices likely provided additional dollars for household spending on retail merchandise,” Kleinhenz said.

Walmart and Target, which reported different results this week, both provided evidence that consumers are continuing to spend — albeit cautiously — as the holidays approach.

Walmart CEO Doug McMillon said Tuesday that the chain has gained market share as shoppers with household incomes above $100,000 continue to visit its stores. Buyers “continue to look for value to maximize their budget,” said CFO John Rainey. The company raised its guidance for the remainder of its fiscal year.

Target, however, lowered its outlook for the remainder of 2024 on Wednesday after the chain said shoppers reduced their discretionary purchases during the third quarter. Chief Commercial Officer Rick Gomez said Target is reducing prices on 2,000 items and offering affordable gifts, like a selection of holiday toys with half the items under $20.

Many prices are even higher than they were before the pandemic, Morning Consult’s Tassin said. This could push many consumers to look for value when buying gifts or hosting holiday parties this year.

But a clear majority of shoppers are willing to spend on gifts, food, drinks and parties during the holidays this year, according to a Morning Consult survey carried out at the end of August and beginning of September. Some were even willing to go into debt or cut back on basic expenses to finance their vacation plans, according to the survey results.

“People are feeling the financial pressure, but that doesn’t necessarily mean they won’t spend,” Tassin said, adding that people might cut back on spending in other areas to ensure they have enough. money for their vacation plans.

“I’ll pay more attention to sales, or I’ll buy the cheaper meat options so I have a little wiggle room to treat myself to other things,” she said.