US Holiday Spend: Retail Resilience Amid Economic Shifts

Navigating the 2025 Holiday Season: A Nuanced Economic Landscape for US Retail

As the festive melodies fill the air and holiday decorations adorn storefronts, the United States is once again embarking on its crucial holiday shopping season. While the joyful spirit of gift-giving is traditionally anticipated, the 2025 season unfolds against a backdrop of unique economic complexities, including a recent government shutdown, persistent inflationary pressures, and emerging signs of a tightening labor market. Despite these headwinds, a detailed analysis reveals a fascinating resilience among certain segments of U.S. consumers, poised to engage in holiday spending reminiscent of less uncertain times, according to recent insights from a comprehensive Gallup poll.

Gallup's initial assessment of anticipated U.S. holiday spending for 2025 indicates that consumers project an average expenditure of $1,007 on gifts. This figure largely mirrors the historically elevated prediction of $1,014 from the previous year and represents a notable increase from the $923 recorded in 2023. Delving deeper into consumer sentiment, approximately one-third of respondents (31%) expect to spend up to $499, with another 18% forecasting expenditures between $500 and $999. A substantial 37% of consumers are planning to spend $1,000 or more, underscoring a strong intention to spend among a significant portion of the population. Interestingly, about 8% of those surveyed indicated no spending plans for gifts this year, while 5% remained undecided about their budgets.

In line with historical patterns, the majority of polled consumers (56%) anticipate their spending to remain consistent with the prior year. However, this proportion is slightly below the 60% average observed since 2006, suggesting a subtle shift in consumer confidence or budgeting strategies. Concurrently, the 19% of individuals who project a slight increase in their holiday spending this year surpasses the long-term average of 14%, indicating a degree of optimism or pent-up demand among a subset of shoppers. Conversely, the 23% who foresee spending less aligns with the long-term average, reflecting ongoing economic prudence for a significant segment of the populace.

Divergent Spending Trends: The Income Divide in Holiday Retail

A more granular examination of holiday spending intentions reveals a pronounced schism along economic lines, as highlighted by Gallup's findings. While the aggregate spending estimate hovers around the $1,000 mark, consistent with last year, a stark contrast emerges when analyzing different income brackets. Households with annual earnings below $50,000 are projected to spend an average of $651 on holiday gifts, marking a considerable decrease from the $776 they anticipated spending during the previous holiday season. This translates to a palpable contraction in discretionary spending power for lower-income households.

Further underscoring this trend, only 18% of lower-income consumers express an intention to spend more this year, a noticeable decline from 28% last year. In 2025, half of these households now state they will spend approximately the same, representing a 10% increase from a year ago in maintaining a status quo amidst perceived economic constraints. Conversely, about 30% anticipate spending less, a proportion consistent with the 28% reported a year prior. This persistent caution among lower-income earners stands in sharp contrast to their higher-income counterparts. Households earning $100,000 or more are projecting an average expenditure of $1,479, an increase from $1,403 last year, demonstrating robust confidence and capacity for holiday spending. Middle-income earners, with projected spending of $847, also show a slight decrease from their $902 expectation in 2023, indicating that economic pressures are not exclusive to the lowest income brackets but are more acutely felt there.

Inflation's Lingering Shadow on Consumer Wallets

Despite a decline from its peak during the pandemic era, inflation continues to present a significant challenge for U.S. consumers as they approach the holiday season. Federal Reserve Chair Jerome Powell aptly articulated this sentiment, noting that while the pace of price increases may have slowed, consumers continue to feel the cumulative effect of higher prices established over the past two or three years. This 'sticker shock' factor profoundly influences purchasing decisions and budget allocations.

Understanding the Inflationary Landscape: Key Metrics

• Monthly CPI Trends: The Consumer Price Index (CPI) demonstrated incremental increases throughout the year, rising 0.3% in September after a 0.4% increase in August. On an annual basis, consumer prices for all goods were 3% higher than the previous year.
• Sector-Specific Impacts: Notably, gasoline prices were 4.1% higher, and energy costs broadly saw a 1.5% increase, directly impacting household budgets and discretionary spending capacity.

While the official CPI report may not explicitly reference tariffs, analysts at Bank of America underscore the considerable role that import duties play in perpetuating inflationary pressures. Their analysis suggests that the core goods Personal Consumption Expenditures (PCE) price index will have risen by 1.3% over the past year and 2.2% on an annualized basis since March, correlating with the implementation of recent tariffs. This represents a significant reversal from last September, when the PCE price index declined by 0.3% year over year.

Bank of America's note further posits that the increase has been predominantly driven by supply-side factors, offering compelling evidence for tariffs as a key culprit. Moreover, the full impact of these tariffs has not yet been entirely passed on to consumers. BofA anticipates that tariff-related inflation will persist in the coming months for two primary reasons: first, companies are likely to continue shifting more of the tariff burden to consumers to safeguard profit margins, especially if economic performance exceeds expectations; second, the effective tariff rate is projected to increase further as the comprehensive effects of recently announced administrative measures fully materialize.

The Unsettling Trend of Holiday Season Job Cuts

Historically, employers often refrained from significant job reductions during the fourth quarter, particularly leading into the holiday season. Data from 2003 to 2013 shows a monthly average of 74,733 job cuts during Q4, which then decreased to approximately 43,000 in the subsequent decade. For October specifically, the average job cut total between 2014 and 2024 stood at around 47,000. However, 2025 presents a notable deviation from this established trend.

According to Challenger, Gray, & Christmas, the current surge in October layoffs is particularly surprising. The firm notes that "Over the last decade, companies have shied away from announcing layoffs in the fourth quarter, so it’s surprising to see so many in October. With the onset of social media, and the ability for workers to share their negative experiences with their employers, the trend of announcing layoffs before the holidays fell away, a practice that seemed particularly cruel." This year's figures suggest a departure from this more considerate approach.

October 2025 Job Cuts by Industry (vs. September)

• Technology: 33,281 (compared to 5,639 in September)
• Retail: 2,431 (compared to 2,577 in September)
• Services: 1,990 (compared to 6,290 in September)
• Warehousing: 47,878 (compared to 984 in September)
• Consumer Products: 3,409 (compared to 1,983 in September)

Cumulatively, through October 2025, employers have announced an alarming 1.1 million job cuts, marking a substantial 65% year-over-year increase from the 665,000 cuts recorded during the same period last year. This figure already surpasses the total job cuts for the entirety of 2024 by 44%. Challenger further identifies 2025 as the most challenging year for job cuts since 2020, when 2.3 million jobs were eliminated. This pervasive uncertainty in the labor market adds another layer of complexity to consumer sentiment and their willingness to spend during the crucial holiday period.

Conclusion: A Complex Outlook for Holiday Retailers

The 2025 holiday shopping season is shaping up to be a period of contrasts. While overall spending projections appear robust, a closer look reveals significant disparities driven by income levels, persistent inflationary pressures, and an unusual surge in job cuts. Retailers and economic observers alike will need to carefully monitor these divergent trends to understand the true health of the consumer economy. The ability of higher-income shoppers to maintain or increase their spending may offset some of the contraction from lower-income groups, but the broader economic implications of inflation and a shifting labor market will undoubtedly cast a long shadow over the festive retail landscape.