How American consumer savings, credit rates are faring against inflation during Christmas

Yahoo Finance columnist Vera Gibbons explains how inflation is weighing on American consumers this holiday season in terms of savings and credit rates.

Video Transcript

SEANA SMITH: Holiday spending is up this season despite the economic turmoil of the last few years. But savings, though, they are down, falling more than 21% since 2020. So are Americans in store for a holiday hangover in the new year? Yahoo Finance contributor Vera Gibbons joining us now with more. And Vera, I guess how concerned should we be that spending is up, yet savings are down pretty drastically, off more than 20%?

VERA GIBBONS: I know. I think you're totally right that the holiday hangover will be coming to consumers. The problem this year is that while we trimmed our Christmas list, and we were trying to, like, winnow down the list to just give presents to our closest loved ones, our friends, our family, the problem is we kind of went big on the gifts. Like, a lot of us bought experiences. We went for more thoughtful, meaningful gifts.

And because so many of us are cash poor right now, we just put it on the credit card. We have no plan to pay down this debt. We just charge it without giving any kind of afterthought because this year, in particular, I feel like a lot of Americans just want to live. They want to celebrate. They're tired of how life has been the past couple of years. They want to enjoy, and they're not necessarily thinking about the consequences

PRAS SUBRAMANIAN: Hey, Vera, so when we look at, sort of like, the pandemic effect and sort of spending from stimulus checks, that sort of has changed behavior, too, hasn't it?

VERA GIBBONS: Oh, totally. Yeah, that's a great point because I think when the stimulus checks went out, everybody was feeling flush with cash. Paying down our debt became a big priority. I mean, there was nowhere to spend money necessarily. People were just staying home. They weren't going out. They weren't going to bars. They weren't traveling at all. So the spending opportunities were really limited.

And the savings rate, virtually by default, hit an all-time high of a little over 33% in April 2020. It stayed elevated through 2021. And if you fast forward to today, our savings rate has plummeted to a 17-year low of just over 2%. So inflation is largely to blame for that, along with the fact that wage growth isn't keeping up with inflation. Yes, inflation is simmering a little bit, but wage growth just isn't there.

DAVE BRIGGS: All right, Vera Gibbons, nice to see you, my friend. Thanks so much for that.