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As Americans prepare to gather for Thanksgiving, the high cost of turkey and travel nags their sense of gratitude. At many family gatherings this month, inflation will be on the menu.
Wholesale turkey prices jumped 23% from a year ago, gobbling up much of the holiday budget. Potatoes and cranberries are also more expensive.
“We haven’t taken a break yet,” says Michael Swanson, chief agricultural economist at Wells Fargo.
High energy costs, labor shortages, harsh weather and bird flu have combined to skyrocket the cost of a Norman Rockwell Thanksgiving, he found.
Grocery prices in September were 13% higher than a year ago, beating the headline inflation rate of 8.2%. The Department of Labor will report Thursday on the October inflation rate.
Polls have shown inflation to be a major concern for voters ahead of this week’s midterm elections.
Swanson says that while some families might try to cut their food bills by shopping at discount supermarkets or switching to cheaper store brands, he doubts many are skimping on the big holiday meal.
“People will eat whatever they want on Thanksgiving,” he says, and make adjustments elsewhere in their budgets.
Likewise, millions of people are paying a premium to see estranged family members this year. Air fares in September were up nearly 43% from a year ago. But the planes are always crowded.
“Travelers are resilient,” says Haley Berg, chief economist for travel booking app Hopper. “Thanksgiving and Christmas trips to see family are considered essential by many, and they won’t compromise, even when the prices are higher.”
For some families, this holiday season could be the first opportunity to reunite since the start of the pandemic.
“Keep in mind that in November and December of last year we had the delta and omicron waves of COVID, which caused mass cancellations and many travelers changed their plans at the last minute,” said said Berg.
Travelers who need to rent a car can save money. Rental prices are slightly lower than they were a year ago, when rental car companies were still struggling to replenish their fleets.
“There has been relief on the supply side,” Berg said. “Car rental companies [have been] increase the number of cars they have.”
Towards a post-holiday hangover
With prices rising faster than incomes on average, some people are dipping into their savings to cover expenses. Others rely on credit cards, even though it is increasingly expensive to maintain a balance.
The average interest rate on credit cards is now over 19%, according to Bankrate, up from 16.3% at the start of the year.
“It’s all about the Fed,” says Ted Rossman, senior industry analyst at Bankrate. He notes that borrowing costs on credit cards have risen steadily as the Federal Reserve raised interest rates at the fastest pace in decades.
Since March, the central bank has raised its policy rate by 3.75 percentage points. Rates are likely to go even higher as the Fed attempts to rein in demand and tame inflation.
“The most important point for consumers is: your [credit card interest] the rate is up,” Rossman says. “It will probably increase more. It is therefore more important than ever to repay this debt.”
In general, Americans do not follow this advice. The outstanding balance of credit cards and other forms of revolving debt rose nearly 13% over the summer and early fall, according to the Federal Reserve.
“Despite all the worries, people are spending aggressively,” Rossman says. “I think the holiday season also plays a role.”
He notes that so far, delinquencies and defaults on credit card debt are well below historical levels. But Rossman thinks consumers’ willingness to keep paying higher prices could be reaching its limit.
“I think there’s going to be a lot of hangovers after the holidays,” he says. “A lot of sticker shock in January, unfortunately.”
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