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As Americans prepare to gather for Thanksgiving, the high cost of both turkey and travel is gratifying on their sense of gratitude. At many family get-togethers this month, inflation will be on the menu.
Wholesale turkey prices have jumped 23% from a year ago, gobbling up a big chunk of the holiday budget. Potatoes and cranberries are more expensive as well.
“We haven’t caught a break yet,” says Michael Swanson, lead agricultural economist at Wells Fargo.
High energy costs, labor shortages, challenging weather conditions and avian flu have combined to push the cost of a Norman Rockwell Thanksgiving through the roof, he’s found.
Grocery prices in October were 12.4% higher than a year ago, according to a report from the Labor Department released on Thursday. That outstrips the overall inflation rate of 7.7%.
Polls showed inflation was a top concern for voters heading into this week’s midterm elections.
Swanson says that while some families might try to cut their food bill by shopping at discount supermarkets or switching to less-expensive store brands, he doubts many will scrimp on the big holiday meal.
“People will eat what they want to eat on Thanksgiving,” he says, and make adjustments elsewhere in their budgets.
Likewise, millions of people are paying a premium to see distant family members this year. Airfares declined slightly in October from the previous month, but are still nearly 43% higher than they were a year ago. Nevertheless, planes are still packed.
“Travelers are resilient,” says Haley Berg, lead economist for the Hopper travel booking app. “Thanksgiving and Christmas travel to see family is considered essential by many, and something they won’t compromise on, even when there are higher prices.”
For some families, this holiday season might be the first opportunity for a reunion since the beginning 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 to change their plans at the last minute,” Berg says.
Travelers who need to rent a car may find some savings. Rental prices are 3.5% lower than they were a year ago, when rental car companies were still struggling to rebuild their fleets.
“There’s been relief on the supply side,” Berg says. “Car rental companies [have been] bulking up the number of cars they have available.”
Looking toward a post-holiday debt hangover
With prices climbing faster than incomes on average, some people are digging into savings to help cover expenses. Others are relying on credit cards, even though it’s getting more expensive to carry a balance.
The average interest rate on credit cards now tops 19%, according to Bankrate — up from 16.3% at the beginning of the year.
“It’s really 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 has raised interest rates at the fastest pace in decades.
Since March, the central bank has raised its benchmark rate by 3.75 percentage points. Rates are likely to go even higher, as the Fed tries to tamp down demand and bring inflation under control.
“The most important point for consumers is: your [credit card interest] rate is way up,” Rossman says. “It’s probably going to go up more. So it’s more important than ever to pay down this debt.”
In general, Americans are not following that advice. The outstanding balance on credit cards and other forms of revolving debt rose nearly 13% in 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 factors into this as well.”
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 may be reaching its limit.
“I think there’s going to be a lot of post-holiday debt hangovers,” he says. “A lot of sticker shock in January, unfortunately.”