American consumers are proving determined to celebrate the holiday season, even as economic uncertainty lingers. According to Visa Business and Economic Insights' (VBEI) annual holiday forecast for the U.S., shoppers plan to spend more this season than last year. But the economic picture beneath the surface tells a more complex story.
Overall, VBEI is forecasting a 4.6% year-over-year increase in total U.S. retail sales, excluding automobiles, gas stations and restaurants, from November 1 to December 24, 2025. But inflation is expected to be a larger contributor to sales growth, as opposed to actual sales volume compared to last year. After accounting for inflation on holiday items, real spending — a good proxy for foot traffic — is expected to rise just 2.2% this year, down from the 2.5% real spending that occurred last season.
Stockings (and spending) are hung with care
One of the more confounding aspects of the current economy is how well consumer spending has held up despite the trifecta of weaker job growth, elevated inflation and extreme economic uncertainty.
In the Consumer Price Index (CPI), groceries and other food at home rose 2.7% year-over-year in August, and Visa’s data shows similar trends. Consumers reported in the October 2025 VBEI quarterly consumer survey that they plan to spend an average of $736 on holiday gifts, marking a roughly 10% rise from the $669 reported in 2024. This uptick reflects a resilient willingness to spend, even as economic uncertainty and inflation persist.
Those with more people to shop for, such as grandchildren, and greater purchasing power are fueling this trend. Survey data shows that while Gen Z, millennial and Gen X consumers expect to spend between 5 to 7 percent more on the holidays, baby boomers indicate a 21% increase to $855.03 on average. The increase in average spending suggests that, despite softer consumer confidence and slower income growth, holiday shopping remains a priority for many households.
Those who plan to spend less — nearly 20% of the consumer population — cite a lack of extra income or lower confidence in the economy as a reason for pulling back.
Income is bright, but real growth is light
One reason consumer spending continues to hold up? Nominal personal income growth remains solid, even as real (inflation-adjusted) disposable income growth has moderated. This dynamic allows consumers to maintain spending levels in dollar terms, though their purchasing power is constrained by persistent inflation on holiday-related goods.
With inflation on holiday-related items higher this year than last season, nominally reported holiday sales are expected to rise 4.6% year-over-year, up from a 4.3% pace last year. Aside from higher-priced holiday goods pushing the forecast higher, one additional shopping day this season will help provide a slight tailwind to sales.
For retailers, though, it may not feel like a jolly shopping season. The 2.2% real spending growth means fewer items are being purchased, even as dollar volumes increase, suggesting potential challenges for inventory turnover and margin management.
Holiday cheer comes early this year
The holiday shopping season continues to extend across the entire fourth quarter. More than half (57.7%) of all consumers report that they are starting in October, citing store promotions and sales as well as product availability as key factors. Rather than concentrating purchases in the traditional post-Thanksgiving rush, shoppers are starting earlier — and online — with 48% of consumers saying they will do more than half of their holiday shopping online.
As such, VBEI also estimates holiday sales including the month of October. Under this broader definition, the forecast shows holiday sales rising 4.5% year-over-year, down from 4.8% in 2024.
Holiday season resilience tempered by reality
Holiday 2025 presents consumers, particularly baby boomers, demonstrating willingness to maintain and even increase spending despite economic headwinds. But the 2.4-percentage-point gap between nominal growth (4.6%) and real growth (2.2) tells the true story: inflation is doing much of the heavy lifting.
For retailers and the broader payments ecosystem, this means strong top-line transaction volumes but potentially challenging unit economics. For consumers, it means careful budgeting and strategic shopping will be essential to make holiday dollars stretch further in an environment where everything costs more.