Americans are heading into the holiday season with both caution and a readiness to celebrate: the National Retail Federation now projects U.S. holiday spending will exceed $1 trillion on gifts, food and decorations, marking roughly 4% growth year over year. Retailers are responding with some of the deepest discounts seen in recent years as shoppers hunt for value and selectively trade up on big-ticket items while skimming smaller add-ons. Differences in forecasts and uneven household finances mean the season’s final outcome remains a mix of record-setting totals and uneven participation.
Key takeaways
- NRF projects more than $1 trillion in U.S. holiday spending, about a 4% increase from last year.
- Deloitte’s forecast is more conservative, estimating roughly 3% growth in holiday sales.
- Adobe Analytics expects Black Friday discounts up to about 28% on categories such as electronics and toys.
- Higher-income households are accounting for much of the lift; lower-income shoppers are cutting extras and favoring value options.
- Retailers mitigated expected tariff shocks by delaying price hikes, stockpiling inventory, or absorbing costs.
- Consumer sentiment remains near historic lows in the University of Michigan survey even as seasonal spending holds.
- Interest in Buy Now Pay Later and higher credit-card borrowing is supporting purchases despite cautious sentiment.
Background
After a year dominated by tariff headlines and rising living costs, many consumers appear willing to spend again for seasonal celebrations. The National Retail Federation’s outlook reflects that appetite, building on last year’s roughly 4% sales gain. Competing estimates from private firms like Deloitte show a smaller increase, highlighting forecasting uncertainty amid volatile inputs such as energy prices, wages and trade policy.
Retailers faced months of tariff-related risk but in many cases worked to blunt the consumer impact. Large chains stocked extra inventory and negotiated with suppliers; some absorbed added costs rather than immediately passing them to shoppers. Meanwhile, household financial conditions are mixed: employment and wage growth have supported spending for some, but elevated prices and increased credit usage are pressuring others.
Main event
On the ground at Ross Park Mall in Pittsburgh, shoppers exemplified the season’s mixed dynamics. Young shoppers Marissa McCune and Logan Koegler left with an Apple Watch and a Stanley cup, reflecting a willingness to splurge on a few notable items while keeping other purchases modest. Their choices mirror a broader pattern where consumers trade up on a single premium gift while cutting smaller, discretionary items.
Independent retailers report a pullback on add-on purchases that once buoyed margins. At Klem’s general store in Spencer, Massachusetts, owner Jessica Bettencourt said customers still buy essentials like pet food but are skipping extra impulse items such as an additional toy or luxury hand cream. That shifting basket composition has stores planning earlier and deeper markdowns on certain holiday-trim categories.
Online-tracking firms expect Black Friday deals to be meaningful this year. Adobe’s analysis points to particularly steep discounts on TVs, toys and appliances, and deeper apparel markdowns than last season. Retailers are using promotions to convert cautious shoppers who are motivated by emotion—holidays, rituals and gift-giving—despite weak overall sentiment readings.
Analysis & implications
The distributional pattern of spending—strong among higher-income households, weaker for lower-income consumers—has important implications for retail winners and losers. Premium brands and big-ticket electronics may see outsized gains, while smaller retailers dependent on impulse buys risk softer revenues. This could widen performance gaps within the sector during the fourth quarter.
Retailers’ ability to hold prices down despite tariff threats owes largely to timing and scale. Large chains that hedged inventory and adjusted supply chains bought time; smaller firms with thinner margins face steeper challenges. If tariffs or shipping disruptions intensify, the short-term relief could evaporate and prompt faster price increases sustained into next year.
Credit trends are another vulnerability. Growth in credit-card balances and broader use of Buy Now Pay Later services have smoothed the path to purchase for some households but raise concerns about repayment stress if economic conditions deteriorate. Policymakers and lenders will be watching whether holiday spending translates into durable consumption or short-term debt-fueled lifts.
Comparison & data
| Source | Projection / Finding |
|---|---|
| National Retail Federation (NRF) | Holiday spending >$1 trillion; ~4% growth |
| Deloitte | Holiday sales growth ~3% |
| Adobe Analytics | Black Friday discounts up to ~28% on select categories |
These headline figures show both consensus and spread: most trackers expect positive year-over-year growth, but the exact pace varies. The variance reflects different methods—panel-based consumer surveys, retailer sales data, or transaction-level web analytics—and differing assumptions about tariffs, inventory and consumer credit capacity.
Reactions & quotes
Retailers and analysts offered cautious optimism and concrete tactical notes about inventory and pricing.
“They’re coming in and buying dog food, but maybe not buying two dog toys.”
Jessica Bettencourt, Klem’s general store (small business owner)
“As we approach the holidays, we know consumers remain cautious…Yet they remain emotionally motivated.”
Rick Gomez, Target (retail executive)
“I was ballin’ out with the Apple Watch,”
Marissa McCune (shopper, Ross Park Mall)
Unconfirmed
- Whether the NRF’s >$1 trillion projection will hold through returns and post-holiday adjustments remains to be seen.
- The extent to which deep Black Friday discounts will meaningfully boost spending among lower-income households is unclear.
- Longer-term price effects from tariffs are uncertain; current firm-level measures to absorb costs may not be sustainable if tariffs persist or escalate.
Bottom line
The 2025 holiday season looks poised to exceed $1 trillion in U.S. spending, driven largely by higher-income households and sustained by targeted promotions and financing options. Retailers are preparing deeper discounts to capture selective demand, especially on electronics, toys and big-ticket gifts.
That combination—record-scale totals alongside uneven consumer participation—means winners will be those who manage inventory, pricing and financing options best. Watch three things closely: final sales tallies versus forecast spreads, discount depth and timing, and signs that broader macro stress (jobs, inflation, credit) is changing consumer behavior into the new year.
Sources
- NPR — news reporting on shopper behavior and on-site interviews (media)
- National Retail Federation (NRF) — industry trade group holiday spending forecast (official/industry)
- Deloitte — alternative holiday sales forecast and retail analysis (consulting)
- Adobe Analytics — online transaction tracking and Black Friday discount analysis (industry analytics)
- University of Michigan Surveys of Consumers — monthly consumer sentiment index (academic survey)
- Target Corporation Investor Relations — company comments on consumer behavior and sentiment (company/earnings)