Is inflation getting in the way of the holiday season?

Despite economists’ fear of recession in 2023, many Chileans aren’t cutting corners on Christmas. A survey conducted by Clever revealed that 42 percent of Chileans say they will spend between CLP$100,000 and $200,000.  Nearly two-thirds said they budgeted for Christmas, which shows a better awareness towards savings, says one finance analyst.

With Christmas and New Year’s Day just around the corner, Chileans are getting ready to celebrate the holidays. Chile is a predominantly Catholic country where Christmas is important and widely celebrated. However, inflation risks ruining the party.

Chile’s growth momentum is currently favorable, as service sectors and employment are returning to pre-pandemic levels, but Chile has been raising interest rates to try to control inflation, and, while high rates generally dampen inflation, they also drag down economic growth and discourage access to credit by making financing scarcer and costlier. According to the BCCh, the country currently has the third highest interest rate (11.25 percent) after Argentina and Brazil. 

Inflation rates are now beginning to show signs of moderation ahead of the holiday season, with two consecutive months of falling rates, but product prices don’t usually decelerate more sharply until after Christmas.

Relevant to the above, the investment platform Clever conducted a survey of about 350 people to try to understand Christmas consumption. The poll revealed that 38 percent plan to spend less than last year, 29 percent plan to spend the same, and 33 percent plan to spend more.

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Is Chile entering a recession in 2023?

Despite rumors of an austere holiday, 42 percent of Chileans say they will spend between CLP$100,000 and $200,000; while 20 percent believe they will spend between CLP$50,000 and $100,000; and 30 percent expect they will spend over CLP$200,000.

What will shoppers be buying? According to respondents, 75 percent will be allocated to gifts, while 16 percent will go towards Christmas dinner, and the rest will be used for decorations and costumes.

In terms of resources for this spending, 66 percent of those polled said they had to save exclusively to cover these expenses; at the same time, 49 percent said they believed that people will go into debt for Christmas.

“It is a good sign that people are aware of what this type of spending entails within their budget and that they prepare through savings. However, the perception that a high percentage of Chileans will go into debt to cover the expenses is … striking,” said Kamila Cortez, Finance Content Manager at Clever.

“It is also noteworthy that a smaller percentage will increase their spending for this celebration, which can be understood in the economic context of the country,” Cortez concluded.

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