Millionaires plan to cut their holiday spending due to inflation

A pedestrian carries shopping bags as he walks in Union Square on May 17, 2023 in San Francisco, California.

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American millionaires are cutting back on holiday spending and becoming more budget-conscious as a result of inflation, a sign spending cuts are now moving up the wealth ladder, according to a CNBC survey.

The CNBC Millionaire Survey found that 80% of millionaires polled — those with investable assets of $1 million or more — say they plan to spend less this holiday season due to inflation. Millennials are more likely to cut back, with 100% saying they plan to spend less, compared to 78% of baby boomers.

When asked how they respond to inflation, the majority of millionaires (52%) said they are “more price conscious” when shopping, and a third said they eat out at restaurants less often.

“They’re becoming more careful about how they spend their money,” said George Walber, president of Spectrem Group, which conducts the Millionaire Survey with CNBC.

Walmart Nearly three-quarters of the company’s gains in grocery market share during the quarter ended Oct. 31 came from shoppers with incomes of more than $100,000, CFO John David Rennie said in November, indicating affluent shoppers are looking for the lowest prices.

Retailers that cater to wealthier customers - eg lululemon And the R They also recently lowered their guidance or sales forecasts, providing early hints of weakness at the top.

While inflation has affected their spending, millionaires are divided when it comes to inflation-induced changes in their investment portfolios. When asked about making changes to their portfolio due to inflation, 29% reported that they have made changes, while another 11% said they plan to make changes. Almost a third (30%) said they “may or may not” make changes, and 31% said they are not planning any changes.

Walber said that while millionaire investors are well aware of the impact of higher rates on their investments and the need to transform their investment portfolios, they are unsure of the exact measures to take.

“They are not sure where they should make the changes,” he said. “People don’t want to try to market time.”

Millionaires also expect inflation to remain high through 2023. When asked how long they expect the current rate of inflation, around 7% year-on-year, to last, most respondents said at least one year, with 12% saying between two and five years.

However, millionaires generally believe in the Fed’s ability to bring down inflation. Most respondents (58%) said they were confident or “very confident” in the Fed’s ability to manage the rising rate of inflation. Only 37% said they were “not at all confident”.

However, belief in the Fed varies greatly by age and political party: the majority of millennial millionaires (55%) are “very confident” in the Fed, compared to only 5% of baby boomers. The discrepancy may be due to baby boomers’ recollections of the 1970s, when the Federal Reserve struggled for years to control runaway inflation, Walber said.

“Millennials have never seen this kind of inflation or these levels of interest rates before,” he said.

The Democrats are also more reassured by the Fed. More than 80% of Democratic millionaires said they were “confident” or “very confident” in the Fed, while 56% of Republican millionaires said they were “not confident at all.”

The CNBC Millionaire Survey was conducted online in November. 761 respondents, representing the financial decision-makers in their families, are eligible for the survey. The survey is conducted twice a year, in the spring and fall.