Inflation Concerns Drive Consumer Sentiment Ahead of Holiday Season

Consumer sentiment and inflation remain top of mind for Federal Reserve Chairman Kevin Warsh as he suggested that the central bank may not be done fighting inflation. The McKinsey & Company's ConsumerWise survey, released this week, shows how holiday budgets and spending plans align with Chairman Warsh's remarks at the Jackson Hole Symposium.

The survey found that one in four U.S. consumers reported feeling pessimistic about economic conditions, while 41% reported mixed feelings and 34% were optimistic. Rising prices and inflation were by far consumers' greatest concern, cited by 53% of respondents.

Despite this, many consumers plan to spend the same or more on holiday shopping compared to last year. The survey revealed a -45% net spending intent for home decor, meaning that the group of people planning to cut back on decorating their homes is 45 percentage points larger than those planning to spend more.

Consumers are also cutting back on discretionary purchases such as furniture, treats, trips, and eating out. However, they plan to do holiday shopping gradually throughout the fall, with 10% saying they had already begun their holiday shopping when surveyed.