National Retail Federation predicts first $1 trillion holiday shopping season

Americans Expected to Increase Holiday Spending Despite Economic Pressures

American consumers are projected to boost their holiday shopping expenditures this season despite ongoing economic uncertainties and rising prices, according to a forecast released Thursday by the National Retail Federation (NRF).

The 2025 outlook estimates that shoppers will collectively spend between $1.01 trillion and $1.02 trillion during November and December, representing an increase of 3.7% to 4.2% compared to last year’s $976 billion in holiday sales.

“We’re seeing really positive behavior and engagement from consumers,” said NRF President and CEO Matthew Shay during a media call. “In fairness, that’s been somewhat of a surprise.”

The projected growth rate exceeds the pre-pandemic average increase of 3.6% recorded between 2010 and 2019, though it falls short of the extraordinary pandemic-era surges when holiday spending jumped by 8.9% in 2020 and a remarkable 12.5% in 2021.

Despite the positive outlook, Shay acknowledged that consumers are becoming more selective and increasingly focused on discounts. While overall spending is expected to rise, the growth rate appears to be moderating compared to recent years.

The forecast comes at a particularly challenging time, coinciding with the longest government shutdown in U.S. history, now in its 37th day. The absence of official government data on retail sales and employment has complicated economic forecasting.

“Forecasting is increasingly challenging in this environment,” Shay admitted.

Other industry analysts have issued similar projections that point to continued but slowing growth. Mastercard SpendingPulse predicts a 3.6% increase in holiday sales from November 1 through December 24, down from last year’s 4.1%. Deloitte Services LP forecasts growth between 2.9% and 3.4% for the extended holiday season through January 31, compared to 4.2% last year.

The digital marketplace also reflects this trend, with Adobe projecting U.S. online sales to reach $253.4 billion this holiday season, growing by 5.3% – significantly lower than last year’s 8.7% expansion.

Mark Matthews, NRF’s chief economist, pointed to evolving consumer behavior, with shoppers more aggressively hunting for deals. Families are also cutting back on restaurant outings, reflecting more careful spending habits.

The timing of the government shutdown is “absolutely problematic,” Matthews noted, as it has led to losses in private sector income that erode consumer demand. While spending should rebound once the shutdown ends, broader economic concerns will remain.

One troubling trend is the widening gap between high and low-income households. According to Bank of America data, spending growth among lower-income households rose just 0.6% in September compared to the same period last year, while higher-income households increased spending by 2.6% – more than four times faster. Wage growth also favors higher-income brackets, making it increasingly difficult for lower-income families to manage rising prices.

Bank of America economists Stephen Juneau and Aditya Bhave highlighted that U.S. consumers are currently bearing 50% to 70% of U.S. tariff costs, a burden expected to increase. “We think there is overwhelming evidence that tariffs have pushed inflation higher for consumers,” they wrote in a recent report.

The retail landscape is further complicated by numerous companies announcing job cuts, citing various factors including tariff-related cost increases, changing consumer preferences, corporate restructuring, and increased investment in artificial intelligence. These workforce reductions have prompted retailers to scale back their seasonal hiring plans.

Holiday spending remains a crucial economic indicator, accounting for approximately 19% of annual retail sales – with some retailers relying on the season for an even larger portion of their yearly revenue. As consumer spending drives roughly 70% of the nation’s gross domestic product, economists and policymakers will be closely monitoring retail performance in the coming months for signals about the broader economic outlook.