Mastercard Expects Holiday Spending Growth to Slow to 3.6%

MEI projects a deceleration in 2025 holiday retail sales growth (ex-autos) to 3.6%, down from 4.1% in 2024, as consumers prioritize value amidst broader economic uncertainty, potential tariff impacts, and varied income trends. This outlook is corroborated by Deloitte's moderated forecasts and PwC's expectation of a 5% decline in consumer holiday spending, while eCommerce is anticipated to sustain strong growth at 7.9%.

Analysis

A consensus is forming around a significant deceleration in U.S. holiday retail sales growth for 2025, signaling a more challenging environment for the sector. MEI projects non-auto retail sales growth of 3.6%, a slowdown from 4.1% in 2024, an outlook largely corroborated by Deloitte's forecast of 2.9% to 3.4% growth. This moderation is attributed to broader economic uncertainty, a bifurcated consumer base where lower-paid workers face moderating wage growth, and the ambiguous impact of tariffs on pricing. Highlighting a more severe downside risk, PwC's forecast calls for an absolute 5% decline in consumer holiday spending, the first such drop since 2020. A key structural trend remains intact, with eCommerce sales projected to grow a robust 7.9%, substantially outpacing the 2.3% growth anticipated for in-store sales. This indicates that while overall spending is cooling, the digital channel shift continues to accelerate, forcing a strategic imperative on retailers.

Key Decisions for Investors

• Given the forecasted slowdown and consumer focus on value, investors should adopt a more cautious stance on the broad retail sector, favoring companies with strong pricing power and efficient supply chains.
• Prioritize investments in retailers with robust, high-growth eCommerce platforms, as the projected 7.9% online growth starkly contrasts with the sluggish 2.3% forecast for physical stores.
• Monitor the performance divergence between retailers catering to resilient high-income consumers versus those exposed to more constrained lower-income segments, and watch for tariff announcements as a key potential catalyst for margin compression.