Despite ongoing economic challenges, American shoppers are anticipated to spend more during the upcoming holiday shopping season than they did last year. According to a forecast released by the National Retail Federation (NRF) on Thursday, total holiday spending in November and December is expected to reach between $1.01 trillion and $1.02 trillion, marking an increase of approximately 3.7% to 4.2% compared to the $976 billion spent during the same period last year.
This projected growth in holiday spending comes as something of a surprise to many industry observers, given the backdrop of economic uncertainty, rising prices attributed in part to tariffs imposed under President Donald Trump’s administration, and a downbeat consumer sentiment. “We’re seeing really positive behavior and engagement from consumers,” said Matthew Shay, NRF’s President and CEO, during a press call. However, he cautioned that many shoppers are becoming more selective with their purchases and are increasingly focused on hunting for discounts. While spending is expected to increase, the rate of growth may be slowing compared to previous years.
To put this forecast into historical context, the NRF noted that the average annual increase in holiday spending between 2010 and 2019 was about 3.6%. In the years following, there was a significant surge due to the COVID-19 pandemic’s impact on consumer behavior, with holiday sales rising 8.9% in 2020 and soaring 12.5% in 2021. The current forecast, therefore, suggests a moderation from those pandemic-era spikes, though spending growth remains above the previous decade’s average.
The NRF’s forecast is derived from a comprehensive economic model that considers a range of key indicators, including consumer spending patterns, disposable personal income, employment levels, wage trends, inflation rates, and recent retail sales figures. It is important to note that the NRF’s calculations exclude certain sectors such as automobile dealers, gas stations, and restaurants, focusing instead on core retail sales. Holiday shopping typically accounts for about 19% of annual retail sales, though the proportion can be significantly higher for some retailers. Consumer spending overall is a critical driver of the U.S. economy, representing roughly 70% of the nation’s gross domestic product (GDP).
This year’s forecast arrives amid unprecedented challenges, including the longest government shutdown in U.S. history, which has lasted 37 days at the time of the report. The shutdown has resulted in a pause in the release of official government data on employment and retail sales, making economic forecasting more difficult. “Forecasting is increasingly challenging in this environment,” Shay admitted, highlighting the uncertainties faced by retailers and economists alike.
Despite these hurdles, the NRF’s outlook aligns with other industry forecasts that also anticipate slowing, yet positive, growth in holiday sales. Mastercard SpendingPulse, which tracks spending across all payment methods including cash, predicts a 3.6% increase in holiday sales between November 1 and December 24, slightly lower than last year’s 4.1% growth. Similarly, Deloitte Services LP projects holiday retail sales to grow between 2.9% and 3.4% during the period from November 1 through January 31, compared to a 4.2% increase last year. Adobe, focusing on online sales, expects e-commerce to reach $253.4 billion this holiday season, representing a 5.3% increase, which is smaller than the 8.7% growth seen in the previous year.
One notable trend highlighted by NRF economists is a shift in consumer behavior towards a greater emphasis on value and discounts. Mark Matthews, the NRF’s chief economist and executive director of research, pointed out that while spending remains robust, consumers are increasingly seeking deals and being more cautious with their expenditures. This shift extends to leisure activities as well; NRF executives noted a decline in the frequency of family nights out at restaurants, reflecting a more conservative approach to discretionary spending.
The ongoing government shutdown has also had a tangible impact on the economy, particularly by reducing private sector income and consequently dampening consumer demand. Matthews described the timing of the shutdown as “absolutely problematic,” stressing that while spending may bounce back once the government reopens, there are broader structural issues that will continue to affect consumer behavior beyond the immediate crisis.
One of the key concerns is the widening economic divide between wealthier and lower-income households. Data from Bank of America, based on spending patterns of its credit card and bank customers, revealed that spending growth among lower-income households