Costly Christmas: Shoppers will face higher prices on holiday goods
Retailers are already talking about price increases of up to 15 percent this year on holiday goods, from staples like tree ornaments and toys to luxury gifts like European handbags and clothing. The main cause? It's the same old chestnut: soaring energy prices.
While most consumers are just starting to think about back-to-school shopping, retailers are already preparing for the critical holiday season. Consumers have been seeing prices creep up for many products, but now escalating cost pressures — which are also being fueled by the weaker dollar and higher labor costs in China — are forcing merchants from low-price warehouse clubs to upscale clothiers to pass on more of the burden in the months ahead.
Many stores are still deciding on their holiday prices, and receding oil prices in recent weeks could provide a bit of relief. Still, buying that status handbag now might help shoppers save a little — but for some items, it's already too late. And any big surge in demand could lead to more bad news on the inflation front, serving as a catalyst for prices to spiral.
"Truthfully, I probably won't purchase items that go up that much — especially something like Christmas decorations," said Marilyn Reese of Cincinnati.
Carl Steidtmann, chief economist at Deloitte Research, says that price inflation will be yet "another factor that undermines consumer purchasing power and will hurt spending even more."
"This will be a very difficult holiday season," he said.
The price increases come as stores also have to be pushing even deeper discounts this holiday season to attract customers. But that 50 percent off may not be as good a deal as last year, since the original price could be higher.
Even Costco Wholesale Corp., which had been one of the bright spots in retailing, warned last week that its profit was getting squeezed by rising energy costs and it would have to raise prices more. Richard Galanti, Costco's chief financial officer, specifically cited holiday decor and rotisserie chickens, which are popular for holiday meals.
Holiday decor will be as much as 12 percent pricier this holiday season than a year ago, and the price of rotisserie chicken, which had been $4.99 for years, was raised to $5.49 about three months ago and just went up to $5.99 last week.
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