Despite political claims of low inflation, American consumers anticipate higher holiday spending in 2025, averaging $847 (up 4.6%), largely due to expected price increases and tariffs, rather than increased discretionary income. Forecasts from Adobe and Mastercard project online holiday sales growth of 5.3% and overall retail sales growth of 3.6% respectively, with inflation being the primary driver of dollar-term growth, not increased sales volume. This indicates budget-conscious consumers are prioritizing essential goods (groceries +23%) while cutting back on discretionary items like toys and furniture, presenting a complex environment for retailers navigating rising costs and consumer demand for value.
Americans are bracing for higher costs this holiday season, despite President Donald Trump’s assertion that falling prices will spell “good news” for shoppers. According to a recent Consumer Pulse survey from KPMG, shoppers anticipate spending an average of $847 in 2025, up 4.6 percent compared to last holiday season. In addition, eight in with ten are expecting tariffs to drive up prices. “JUST OUT: Good news for the Holiday Season,” Trump posted to Truth Social on Monday. “EARLY PRICES ARE DOWN, WHILE TARIFFS ARE MAKING OUR COUNTRY AN ECONOMIC POWER AGAIN. Also, virtually NO INFLATION, AS STOCK MARKETS CONTINUALLY HIT RECORD HIGHS. THE BEST OF ALL WORLDS FOR THE U.S.A.” Why It Matters While Trump has elsewhere boasted that inflation has been “defeated” during his second term, it remains above the Federal Reserve’s long-term two-percent target. The most recent report from the Department of Labor found that consumer prices rose 2.9 percent in August from a year earlier, and that core prices—excluding the volatile food and energy categories—were up 3.1 percent. Elevated prices have left consumers concerned that this will strain their monthly budgets and demand changes to their holiday season spending. Businesses told Newsweek previously that inflation is likely to hurt their sales this year, and that rising costs from new tariffs have left them in a double bind—forced to raise prices to mitigate the impact while still trying to lure budget-conscious consumers with the seasonal discounts they have come to expect. What To Know According to several forecasts, holiday season spending is expected to grow this year, though these gains will be more muted as a result of the broad-based financial pressures facing consumers in 2025. Data firm Adobe Analytics recently projected online holiday sales rising 5.3 percent year-over-year to $253.4 billion for the period between November 1 and December 31, compared to the 8.7 percent jump seen in 2024. Additionally, some note that the rise in dollar-term spending may owe more to rising prices rather than any uptick in enthusiasm among shoppers. The Mastercard Economics Institute expects modest growth of 3.6 percent in seasonal retail sales, but wrote in its report that “inflation is expected to be a larger contributor to sales growth, as opposed to actual sales volume compared to last year.” KPMG likewise said that for most consumers, plans to spend more reflect expectations of “higher costs rather than having more discretionary funds or their financial situation improving this year.” “The consumer is spending like a poker player with a small chip stack,” said Duleep Rodrigo, KPMG’s Consumer & Retail leader for the U.S. “They know they can’t play every hand but are willing to go ‘all in’ on a promising hand with a high emotional payoff.” “There’s also a psychological element where the consumer is managing a complex set of uncertainties,” he added. What People Are Saying Retail expert Nicole Leinbach Hoffman, in a recent interview with Newsweek, said: “Inflation, cost pressures, tariff challenges and other stressors such as debt and high interest rates have consumers budget-minded going into the holidays. E-commerce, I suspect, will continue to grow positively in sales, but I predict at a slower pace than 2024 during the holiday season. Whether in-store or online, however, I think consumers will be seeking deals and shopping early—stretching out their spending and ultimately, pacing with 2024 but not exceeding total holiday sales by much if any." What Happens Next? While holiday spending is expected to rise overall—especially for essential goods such as groceries, which are projected to increase by 23 percent—many shoppers are trimming their budgets in other areas. KPMG’s survey found that consumers anticipate spending less on toys (-15 percent), furniture (-12 percent) and hobby supplies (-9 percent) when compared to last year. Consumers anticipate a 4.6% increase in holiday spending to $847 in 2025, primarily driven by expected higher costs and tariffs, rather than increased discretionary income. This outlook contrasts with political claims of falling prices, as official data from August shows consumer prices rose 2.9% year-over-year and core prices 3.1%, both exceeding the Federal Reserve’s 2% target. Retail sales projections indicate muted growth, with Adobe Analytics forecasting online holiday sales up 5.3% to $253.4 billion, a notable deceleration from 2024's 8.7% jump. Similarly, Mastercard Economics Institute expects a modest 3.6% growth in seasonal retail sales, explicitly stating that inflation, not actual sales volume, will be the primary contributor to this dollar-term expansion. This environment is shaping a budget-conscious consumer behavior, leading to anticipated decreases in discretionary categories such as toys (-15%), furniture (-12%), and hobby supplies (-9%). Conversely, essential goods like groceries are projected to see a significant 23% increase, reflecting a strategic reallocation of consumer budgets towards necessities amidst persistent financial pressures.
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