What's happened
U.S. holiday retail sales grew modestly in late 2025, with consumers spending 3.9% more than last year despite economic uncertainties. While spending remains strong, shoppers are seeking value and using credit options, reflecting a bifurcated economy amid inflation and slowing growth.
What's behind the headline?
The resilience of holiday spending in 2025 underscores a complex economic landscape. Despite inflation and economic worries, consumers continue to spend, driven by wealthier households confident in their financial stability. The use of buy now, pay later plans indicates that many are deferring payments rather than reducing overall expenditure. The slower growth compared to previous years suggests caution, but not a contraction. The 'K-shaped' economy highlights a growing inequality, with the wealthy maintaining spending levels while lower-income groups tighten their budgets. This bifurcation could deepen economic disparities if it persists, potentially impacting overall economic stability. The data signals that consumer confidence remains fragile but resilient, with spending likely to continue at a cautious pace into 2026, influenced by inflation, interest rates, and broader economic policies.
What the papers say
The New York Times reports that holiday spending increased by 3.9%, with consumers seeking value amid inflation. AP News highlights a slower 4.2% rise compared to last year, noting concerns about macroeconomic growth and inflation. Both sources emphasize that wealthier households are driving much of the spending, while lower-income Americans rely on discounts and credit. The concept of a 'K-shaped' economy, discussed by the New York Times, illustrates the divergent experiences across income groups, with the top 10% responsible for nearly half of all spending, and many lower-income households feeling economic strain. The contrasting perspectives reveal a nuanced picture: despite cautious growth, consumer spending remains resilient, but inequality is widening, which could have long-term implications for economic stability.
How we got here
Recent data from Mastercard and Visa show that holiday retail sales in the U.S. increased by around 4%, though growth slowed compared to previous years. This slowdown is linked to inflation, economic concerns, and consumer caution, especially among lower-income households. The concept of a 'K-shaped' economy illustrates the divergence in spending patterns between the wealthy and less affluent, with the top 10% responsible for nearly half of all spending. These trends follow a period of economic turbulence, including inflationary pressures and tariffs impacting prices and consumer behavior.
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