Retailers fear this Christmas could be the worst for a decade.

Shoppers are cutting back on spending while the cost of doing business shows no sign of abating and squeezing profit margins. Despite the fact that households have survived two Christmases under the social restrictions associated with the COVID-19 pandemic, they want to spend less this holiday season, both on gifts and on social gatherings. The reason is the double-digit inflation that is attacking our wallets.

Consumer confidence is also at or near the worst on record as soaring utility bills push up the cost of living. In Germany, retail association HDE is forecasting the steepest fall in Christmas sales since 2007, with retail sales in the crucial November-December period to fall by 4% year-on-year on a price-adjusted basis.

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Due to the rising costs of energy and logistics, merchants cannot even give out pre-Christmas discounts that would attract customers. “This remains a difficult period for retail companies,” HDE chief executive Stefan Genth said, noting that retailers face higher labor and energy bills and a stronger dollar, which is putting pressure on purchasing prices.

In the UK, a number of surveys suggest that more than half of Britons plan to spend less this Christmas. If September’s sharp decline in retail sales were repeated in December, it would be the worst result since comparable annual records began in 1989.

“Retailers are facing perhaps their toughest holiday season in a decade as shoppers look to find bargains and buy less to meet the economic challenges ahead,” said Paul Martin, head of retail at KPMG.

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