Despite the Gloom, Americans Keep Spending: Holiday Sales Set to Top $1 Trillion

This week’s insight congratulates the newest entrant into the trillion-dollar club: you, the American consumer.

The multi-trillion-dollar Magnificent Seven glamour stocks tend to grab the headlines for their size and dominance, but household spending remains the linchpin of U.S. economic growth. And according to the National Retail Federation’s (NRF) latest holiday sales forecast, total retail activity is expected to surpass $1 trillion for the first time.

The NRF projects overall November-December spending to rise between 3.7% and 4.2% from last year, despite dismal consumer sentiment. Last Friday, the University of Michigan’s Surveys of Consumers confirmed what we already suspected—Americans are fed up with Washington dysfunction and remain unhappy about inflation. Add in a jobs market that has ground to a halt, and there doesn’t seem to be much cheer to go around.

But Santa can work wonders. Come airline delays or high inflation, families always seem to shell out leading into Christmastime. What’s more, “the consumer” is not a monolith. Those on the low end of the wealth spectrum are increasingly pinched by slower wage gains and a steadily rising jobless rate, all while consumer prices tick up. But the top, say, 20% of the wealth stack has benefited from rising stock prices. Economists call it the “wealth effect.”

Taken together, the NRF expects a record holiday shopping season. Other indicators agree. While the government remains shut down and no “official” data are available, alternative measures suggest spending across the economy is holding up. The weekly Johnson Redbook index of retail sales continues to show a steady 5% to 6% year-over-year pace. Clues from the ongoing third-quarter earnings season also confirm strong consumption trends among higher-income households. Younger, working-class consumers, however, appear to be tightening their purse strings—something the CEOs of Chipotle and Sweetgreen have both noted.

Ultimately, it’s the same old story: watch what people do, not what they say.

Another nugget of encouragement? All the fears that new tariffs would lead to much higher prices or even shortages of hot holiday items haven’t materialized. “Core goods” inflation, while above 2024 levels, is running at just 1.5%. For perspective, wages have grown about 4% over the past year.

All told, Americans may be frustrated—but you wouldn’t know it from their credit card statements. Malls are busy, flights are full, and fingers will soon be sore from hitting that one-click buy button.

Record Holiday Spending Expected

Source: NRF