By now, you’re probably used to hearing about shortages of every product under the sun. We’ve all lived through toilet paper shortages, lumber shortages, microchip shortages—and about a million others. The global supply chain has been a wreck since the pandemic began, and that’s spilled right on over to shoppers with things like shipping delays, higher prices and empty shelves.
But what does all this mean as we get ready to celebrate the holidays? Turns out, you don’t have to be the Grinch to steal Christmas—the global supply chain is about to get in on the action too. Economists are saying to brace ourselves (and our budgets) for the most expensive holiday season in 30 years.1 Here’s why:
What’s Going On With the Supply Chain Right Now?
To untangle this web, you’ve got to go back to the beginning of the story—back when the pandemic first hit and the economy came to a screeching stop in March 2020. Everyone knew the impact would be a big deal . . . but maybe not this big of a deal for this long.
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And even though the economy has been back up and running for a while now, we’re still having to work through all the kinks just because it shut down it the first place.
Right now, we’ve got the perfect storm of global supply chain issues: Cargo ships (and the items they’re carrying) are stuck in port. There aren’t enough workers to unload those items, if the ships can even reach port). The rising costs of shipping being dumped onto the consumer. Oh, and let’s not forget about one more thing: inflation.
What’s Causing the Supply Chain and Inflation Issues?
The COVID-19 pandemic. A shutdown economy. Fewer workers. Higher prices.
You name it.
Here’s why things are still backed up and why prices keep going up:
This whole port issue can be summed up like this: Shipping containers aren’t able to unload, and that’s causing major bottlenecks at the ports. Some ships are waiting to load up their cargo, some are waiting to unload their stuff, and others just can’t do either one because they don’t have enough workers to do it. It’s a real domino effect, that’s for sure.
President Biden said the Port of Los Angeles (the largest port in the country) and the Port of Long Beach will be open 24/7 to try to make up for lost time and get things moving.2 But working more hours at the port won’t fix the log jam (container jam?) that’s already there. Especially if there aren’t enough workers to unload and pick up the goods. Between the truck driver shortage and the swamped warehouses—the stuff still isn’t moving.3
Of course, these issues at the port are impacting shipping too. First of all, the global cost to ship a 40-foot container averages around $10,359—that’s a 364% price jump from this time last year.4 You can expect that rise in shipping costs to effect the price tag you see on items once they reach the store.
On top of that, even if your items do arrive at the port—they might not make it to shore just yet. That’s because port workers are short-staffed these days. And the tough thing is, there isn’t much you can do about your Christmas gifts sitting in a shipping container in the middle of the ocean—that except order early and hope for a Christmas miracle.
The silver lining here? This is a great reason to go out and support your local businesses. You won’t have to wait on shipping (if the item is in the store), and the chances are, that small business is buying items from other small businesses in your local area. Boom. The best way to beat the shipping problem? Don’t even bother with it.
On the flip side, that’s easier said than done when it comes to getting presents to family out of state. Turns out, USPS, FedEx and UPS aren’t guaranteeing any delivery time this year. In fact, the USPS just made some changes that will make their delivery time even longer (it raised some shipping prices too).5
What Does Inflation Impact?
Did you go as inflation for Halloween this year? Because that would have been a spot-on scary costume. Inflation happens when the prices of things go up but the purchasing power (the value of money) goes down. And here’s the crazy thing about inflation—it affects everything. Everyone wants to talk about the way inflation makes food prices skyrocket, but it doesn’t stop there. Get ready to see higher prices on it all. Yep—even Barbie’s DreamHouse.
Whether it’s Batman, Frozen or Barbie on your Christmas shopping list this year, expect the prices for all plastic toys to be a lot higher. And if you think people won’t be willing to fork over their money and pay those prices, think again. Christmas 2021 is expected to have the highest holiday retail sales on record, with Americans projected to spend somewhere in the ballpark of $850 billion.6
So, why does inflation impact the price of gifts? Well, thanks to inflation, the price to make goods has gone up. And because of that, manufacturers are passing that cost right along to you. Merry Christmas.
And remember those port issues we talked about? They play in big time here too. Stores might have gotten their first shipment of hot Christmas gifts for the season, but what about their next shipment? That one could be stuck in the Port of Los Angeles until who knows when.
Everyone has noticed food prices going up and up these last few months—and that’s not going to change before Christmas. As of October 2021, the inflation rate in the U.S. has risen to 6.2% over the previous 12 months—that’s up 0.9% from September’s numbers.7
So, when you’re making your holiday meals, be prepared for the price of food to be more expensive this year. Like all those secret ingredients you need to make your Grandma’s famous chocolate pie recipe. Sure, if you’re just making one dish for a potluck-style Friendsgiving, food prices might not bother you much. But if you’re hosting Thanksgiving and Christmas dinner this year (you’re a saint), that could take a bite out of your budget if you’re trying to save on grocery costs.
And that’s if you can even find the food you need. Stores are already having a hard time keeping things like canned pumpkin, cranberry sauce, hams and pies stocked. Yikes. Your best bet here is to shop early, but don’t fall into panic buying (aka buying all the stuffing because there might be a shortage).
Know what else inflation impacts? Energy costs. Yep, that means it’s probably going to cost more to keep your home cozy this winter—especially since energy prices jumped more than 80% in 2021.8 Keeping your heating costs down will go a long way to help you steer clear of a massive bill this winter.
Hello, higher gas prices. Goodbye, money. If you’ve filled up your gas tank this year, you’ve without a doubt noticed some pain at the pump. That’s because inflation has made the price of gasoline jump too. The average price for a regular gallon of gas is $3.40—that’s a hike from this time last year when the average price was $2.13.9 So, if you’re planning on driving to see family this Christmas, get ready to feel that burn in your wallet.
Planning to hit the open road this Christmas but don’t want to put wear and tear on your car? Well, that’ll cost you. Not only will you have to deal with those crazy gas prices, but now you’ve got insane car rental prices on your hands. A weekly car rental in Portland, Oregon, will set you back $965.10 Merry Christmas, ya filthy animal—for real.
Looking for more on today's supply chain chaos? Check out this episode of The Fine Print.
6 Ways to Combat Inflation This Christmas:
Here’s the good news: It’s not all bah humbug this Christmas! You don’t have to be a sitting duck (or turkey) and let yourself get hit by the supply chain, shortages and inflation. It’s true that a lot of it is out of your control, but the amount of money you make and choose to spend is in your control. So before you break into your kid’s piggy bank to help you buy their Christmas gifts, here are some ways to save.
1. Shop small and American made.
Buying local goods from a small business not only supports them but also can help guarantee you’re not waiting weeks for an item to show up on your doorstep. Bonus: American-made products can you help you avoid the shipping container mess at the ports too.
2. Order early.
If you’re worried at all about your gifts not getting here in time, put your mind at ease by shopping ahead of time. And when it comes to the holiday food, if you get that shopping out of the way early, you won’t have to worry about price gouging, empty shelves or inflation going up even more (sorry, we had to say it).
3. Use price match guarantees and coupons.
Be on the lookout for this! A lot of stores are offering price matching if you see the same item online. And they’ll match the price right there in the store! Some stores are even offering to adjust the price on an item you buy from them between now and Christmas if it goes on sale for less.
And if you like saving money (who doesn’t?), then you already know coupons are a way of life. Keep your eyes peeled for stores offering big coupons like $20 off your $50 toy purchase. This can really help you make your money stretch.
4. Buy generic food and have a potluck-style meal.
Save some extra dough by saying “no thanks” to name brands for your holiday meal. The store brand green beans will probably taste just like the name brand—no kidding. And speaking of the big meal, why not split the bill for everyone and go the potluck-style route this year. Maybe your mother-in-law buys the turkey, your sister-in-law takes care of the desserts, and you cover the side dishes. It’s a win-win for everyone.
5. Get a seasonal job.
If you haven’t noticed, jobs are everywhere these days. You could throw a rock and hit a “Now Hiring” sign. And that’s especially true if you’re just interested in a seasonal job to make extra money for Christmas.
For example, Amazon is doing its part to combat the supply chain issues by hiring 150,000 seasonal workers this holiday season. They’re even dishing out a $3,000 sign-on bonus.11 Seriously.
Think of a seasonal job just like a side hustle—except a seasonal gig usually runs its course after the holidays are over, and a side hustle you can keep up all year long to make extra cash.
6. Adjust your budget.
Maybe you can already see the writing on the wall—Christmas gifts might cost you more this year. To offset that, adjust your budget. Cutting back on a few budget lines can help you make up the difference. Or maybe that means you need to spend less this year and stick to it. You can still have a Merry Christmas without spending an arm and a leg.
If you ever needed another reason to make a budget, Christmas 2021 is a pretty dang good one. With so many moving pieces and price jumps, it’s more important than ever to know exactly where every one of your hard-earned dollars is going. The best way to keep track of it all is with our free budgeting tool, EveryDollar. Download it today, and get your Christmas budget ready to take on that crazy supply chain! God bless us, everyone.