Despite many economic challenges, holiday spending reached the high end of the 2025 forecast range.
From Nov. 1 to Dec. 21, 2025, U.S. retail sales (excluding autos) increased 3.9% year over year, according to Mastercard. CNBC and the National Retail Federation announced similar increases, reporting that holiday sales from November to December 2025 rose 4.1% year over year.
Official government data collected by the Census Bureau has been delayed due to a backlog caused by the partial government shutdown from October to November 2025. It is currently scheduled to be announced on February 10th, about a month later than usual.
Even without government data, Mastercard and CNBC/NRF’s numbers speak to a strong holiday shopping season, with both estimates hitting the high end of their holiday spending forecasts. For example, NRF predicted in November 2025 that holiday sales would increase 3.7% to 4.2% year over year. Mastercard expected a 3.6% rise. Deloitte also predicted a more moderate annual growth rate of 2.9% to 3.4%.
@bankrate Even though the economy may not be doing so well, Americans still spent a lot of money during the holidays. Bankrate’s Ted Rossman explains why.
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So while retail sales have been strong, there’s still a lot of gloom and misery going on economically. Do retail numbers tell you what’s happening around kitchen tables across the country? Well, it seems to vary wildly from kitchen to kitchen.
Holiday spending contradicts bleak consumer sentiment
“Retail Monitor data showed strong growth in December as consumers continued to prioritize holiday spending on family and friends,” NRF President and CEO Matthew Shea said in a release. “Continued economic momentum brings 2025 holiday season sales near the high end of NRF’s forecast, reaffirming the solidity of consumer sentiment.”
I agree that the economy is doing relatively well overall, but the key word here is “relatively.” For many people, the economy is still not great. And that’s probably an understatement. The Conference Board reported that consumer confidence fell for the fifth consecutive month in December and was near its lowest point in more than a decade. The atmosphere worsened further in January after the holidays. Inflation has fallen, but Americans remain nervous about rising prices. A weakening job market is also weighing on our collective psyche.
However, this contradictory economy seems to have opposing points at every point. Although consumer sentiment has been depressed since the pandemic began in early 2020, the economy hasn’t experienced a recession in nearly six years. The economy is growing (in fact, the recently reported quarter was the strongest in two years), consumer spending is expanding, and the unemployment rate remains low in the big picture (just not as low as it was a few years ago). Stock and home prices are at record highs, and air travel is setting records.
The double-track economy continues to expand
How do we make sense of all this? The answer lies in the K-shaped economy. In essence, the rich are getting richer and the poor are getting poorer. According to Moody’s, the top 10% of earners account for 50% of all spending, the highest on record. While high-income households are driving the economy forward, the other 90% are struggling.
According to a study by Consumer Edge, spending from Black Friday to Cyber Monday in 2025 decreased by 2.2% year over year for the lowest income households (those making less than $40,000 a year), but increased by 2.8% for households earning more than $150,000 a year.
Auto loan delinquencies are at their highest level in 15 years, driven largely by record car prices and led by low-income, low-credit-score borrowers. For low-income households, there are limits to what you can cut from your budget. Rising costs for housing, food, transportation, and just about everything else are placing a heavy burden on this group. For many people, wages have not kept up with rising prices, forcing them to dip into their savings and take on credit card debt.
At the same time, the party continues to support high-income households with the ability to weather rising costs of living. Moreover, they are the ones benefiting from record stock and home prices. If you locked in your mortgage rate at 3% a few years ago, and you have a record amount of home equity and a huge investment portfolio, you’re probably feeling much better off than someone whose rent keeps going up and who hasn’t benefited from the stock market or rising home prices. Roughly two out of three Americans own a home, and a similar percentage are invested in stocks.
What happens next?
The key question going forward is whether the holiday spending momentum in 2025 was the final bulge or a sign of things to come. In most cases, credit card balances spike around the holidays in the fourth quarter, then decline a bit in the first quarter as Americans tackle their New Year’s resolutions to pay off debt. Tax refunds are also helpful.
That trend may be even more pronounced this year than in previous years, as many people struggle with the high cost of living. The cumulative effect (prices have increased by an average of about 25% over the past five years) is currently more influential than year-on-year inflation (about 3%). The weather in January was also worse than usual across the country, which likely led to some spending being cut or postponed.
However, as has been repeatedly pointed out over the past few years, it is dangerous to underestimate the power of consumers. If you look at the consumer sentiment numbers alone, you would think we have been in a deep recession since 2020. But other economic data shows how consumers are boosting the overall economy and overcoming this wall of uncertainty. Consumer spending, GDP growth, and the job market continue to outperform sentiment.
conclusion
Yes, people will spend more because things will become more expensive. But many people spend money because they want to and because they have the ability to do so. Wage growth has outpaced inflation in recent years.
As the saying goes, all news is local. But I’m not specifically talking about geography. It’s more about where you fall on the economic spectrum. As the saying goes, if your neighbor loses their job, it’s a recession; if you lose your job, it’s a recession. The K-shaped economy is expanding, and some people (those doing most of the spending) are doing very well while others are struggling.