California consumers are scared but spending more to get ahead of inflation
Shoppers in California are planning to splurge next holiday season, but not because they’re confident in the future. They are concerned about inflation and think it is better to buy now rather than pay more later.
At least that’s the conclusion of a new report from accounting firm KPMG; It shows that consumers on the West Coast are more concerned about price increases and tariffs than other parts of the country.
Shoppers nationwide plan to increase their holiday spending by 4.6% this year compared to last year, spending an average of $847 on shopping, according to the report.
“When you think about why consumers are planning to spend more, it’s not because they have more wallets to spare, it’s actually an expectation that prices are going up,” Duleep Rodrigo, KPMG US consumer and retail leader, said in an interview. “80 percent of consumers are really very conscious about inflation and inflation affected by tariffs.”
Among six different regions in KPMG’s research, the Pacific region, which includes California, Oregon, Washington, Hawaii and Alaska, showed the highest concern about rising prices due to tariffs, with 72% citing inflation as their top concern.
8 out of 10 consumers across the country believe tariffs will lead to price increases. Consumers in the Northeast were least concerned; here, only 6% said price increases would lead to a cut in holiday spending.
“The consumer is spending like a poker player with a small stack of chips,” Rodrigo said in the report. “They know they cannot play every hand, but they are willing to go ‘all’ for a promising hand with a high emotional payoff. There is also a psychological element where the consumer deals with a complex set of uncertainties.”
KPMG found that consumer spending on basic needs such as food, automotive expenses and personal care will increase in 2025, although much less than last year. People expect to spend less in discretionary categories such as toys, furniture and hobby supplies.
As budgets tighten, more people plan to splurge on themselves this holiday season, making big-ticket purchases with many holiday trips costing more than $1,000.
The top gifts people want to receive this holiday season? According to KPMG, gift cards and apparel revenue following cold hard cash show that more people want the flexibility to spend on the things they love.
Consumer price inflation in Los Angeles increased by 3.3% in August compared to the same period last year. National consumer inflation stood at 2.9% during the same period, according to the U.S. Bureau of Labor Statistics.
From toys to clothing, retailers have experienced varying levels of impact from President Trump’s sweeping tariffs on much of the world this year.
Many retailers are absorbing the cost of tariffs imposed by the Trump administration, but they can’t delay it indefinitely.
Rodrigo said price increases on goods have already begun as retailers act more strategically.
“For now, consumers in the top 20 percent probably drive 80 percent of the economic activity that drives and maintains the current state of the economy,” Rodrigo said. “But there’s a larger population that’s really hurting, and that’s really concerned with their dollars right now.”
