US Holiday Spending Forecasted to Reach $1 Trillion Amid Nationwide Inflation Woes

Holiday shopping in the United States is expected to cross a historic threshold this year, with retail sales projected to exceed $1 trillion for the first time.

The National Retail Federation forecasts holiday spending between $1.01 trillion and $1.02 trillion, representing a 3.7% to 4.2% increase over 2024. This projection comes despite ongoing inflationary pressures, trade uncertainty, and shifts in consumer confidence.

The holiday economy is showing signs of resilience, driven by consumers who continue to prioritize gifts, gatherings, and seasonal experiences. Retail executives and economists note that shoppers may be cautious in sentiment but remain fundamentally strong in purchasing behavior.

According to the NRF, U.S. consumers will redirect spending away from nonessential categories to make room for holiday purchases. The elevated spending environment, however, does not necessarily reflect stronger purchasing power.

Rising prices caused by tariffs and inflation are increasing the overall dollar amount spent. Mastercard forecasts a 3.6% rise in holiday spending this year, but the gains are attributed largely to pricing pressures rather than higher sales volume or increased consumer confidence.

Tariffs Are Quietly Inflating Holiday Budgets

Newly implemented tariffs have become a subtle force behind consumer spending. Analysts estimate that last year’s holiday costs would have increased by more than $40.6 billion under current tariff rates, affecting more than 70% of shoppers. This equates to about $132 per consumer, disproportionately impacting common holiday categories such as apparel and electronics. Clothing imports make up 88% of the U.S. market, and electronics 69%, meaning tariffs alone could have added $82 and $186 respectively to seasonal purchases.

The ripple effect reaches families, retailers, and supply chains. Toy prices are expected to increase by roughly 10% as retailers adjust their inventory strategies. The National Retail Federation reports that 85% of consumers anticipate paying higher prices due to trade policy. Many merchants are keeping stock lean to manage risk, potentially reducing selection in stores.

Economic habits are adjusting accordingly. Large retailers, including Walmart and Target, continue to emphasize doorbuster discounts and extended store hours to attract budget-conscious shoppers. But price sensitivity remains strong, particularly among lower-income consumers who are increasingly strategic about timing purchases or waiting for seasonal promotions.

A Divided Consumer Base Is Powering Uneven Growth

Spending forecasts reflect a divided economy. High-income shoppers continue to fuel growth, spending as if insulated from affordability concerns. According to analysts cited by CNN Business, households earning above $170,000 are still increasing spending at double-digit rates, aided by investment gains and higher discretionary budgets. This top-tier segment is a significant driver of holiday revenue projections.

Lower- and middle-income Americans face a starkly different reality. Bank of America data shows that their credit and debit card spending increased only 0.7% year-over-year, far below inflation levels. Analysts say these shoppers are increasingly cash-strapped, relying on promotions, discounts, and flexible payment methods to make purchases. Many are spending more in dollar terms but receiving fewer goods, demonstrating how inflation erodes real consumption.

These conditions create what economists describe as a K-shaped economy. Wealthier consumers benefit from market gains and continue to travel, buy luxury products, and participate in premium holiday experiences. Meanwhile, Americans with lower incomes are cutting discretionary spending, delaying purchases, or shifting to alternative retailers in search of affordability. The result is strong aggregate spending numbers on paper that mask the strain felt by millions of households.

The Holiday Season Looks Strong, But Strength Isn’t Shared

Forecasts may celebrate a milestone in holiday revenue, yet the story beneath the surface is far more complex. Inflation and pricing volatility are pushing spending totals upward rather than delivering a meaningful sense of financial well-being.

Even as Americans plan budgets for decorations, food, and gifts, many are working harder to stretch every dollar. With the federal government shutdown weighing on private-sector income and tariffs increasing retail costs, consumers enter the season knowing every purchase carries more weight.

As holiday shopping accelerates, the divide between households becomes clearer. Wealthier consumers enable record-breaking totals, while others scale back, delay, or use buy-now-pay-later services to bridge gaps. Retailers will watch these patterns closely, adjusting inventory and staffing as demand shifts. The trillion-dollar milestone may signal economic endurance, but it also highlights a holiday landscape where spending power—and stability—is unevenly distributed.