WASHINGTON — U.S. consumers are approaching the 2025 holiday season with caution but also confidence, buoyed by solid finances and a strong job market even as inflation, tariffs and a federal government shutdown cloud the outlook, according to a National Retail Federation (NRF) webinar featuring Chief Economist Mark Mathews and Vice President of Industry and Consumer Insights Katherine Cullen.
Mathews told attendees that this year’s shoppers are “sentimentally weak but fundamentally sound,” noting that while consumer confidence has fallen to near-historic lows, spending remains resilient. “Over the last few years, we’ve seen consumers spend irrespective of their sentiment levels,” he said. “Wages have exceeded inflation for more than 30 months, unemployment remains historically low, and debt service ratios are manageable. The U.S. consumer continues to be the engine of the economy.”
Strong Spending, Softer Hiring
NRF projects holiday retail sales will rise between 3.7% and 4.2% over 2024, pushing total spending above $1 trillion for the first time, compared with $976 billion last year. Mathews said overall retail sales have grown faster than expected in 2025, with NRF’s own data showing a 5.1% year-over-year gain — well above the 10-year pre-pandemic average of 3.7%.
However, he noted that retailers are proceeding cautiously on staffing amid slower labor market growth. Seasonal hiring is expected to total 265,000 to 365,000 jobs, potentially the lowest in 15 years. “Some hiring has been pulled forward for October promotions,” Mathews said, “and there’s also a little less need for labor as retailers increasingly use automation and AI tools to boost efficiency.”
Inflation, Tariffs and Uneven Household Pressure
Mathews said tariffs on imported goods are contributing to “goods inflation,” particularly for durable products, adding cost pressures for both retailers and consumers. Still, he emphasized that household finances overall remain healthy.
“The unemployment rate is near its lowest level in five decades, and household debt payments as a share of disposable income are back to late-1990s levels,” Mathews said. “Credit card and mortgage delinquencies are low, though auto and student loan delinquencies bear watching.”
That stability, however, masks widening disparities. “We live in an economy today powered by higher-income consumers,” Mathews said. “Lower-income households benefited from wage gains and savings during the pandemic, but those buffers have largely been spent down. They face more pressure from higher prices and uncertainty about government benefits.”
Shoppers Plan to Spend, But Carefully
Cullen said NRF’s latest consumer survey shows that shoppers plan to spend an average of $890 this holiday season, just 1.3% below last year’s record $902 — still the second-highest level in the survey’s 23-year history. Roughly $628 of that total is allocated to gifts, with most consumers prioritizing immediate family.
Families with children stand out as an exception to tightening budgets: they plan to spend $33 more on gifts than last year, compared with a $13 decline for the average shopper. “Parents are placing an even higher premium on gift-giving this year,” Cullen said. “They’re not only buying for their kids but also for friends, coworkers and others — a sign that emotional connection remains central to the holiday experience.”
Still, consumers are adjusting to higher prices. Nearly all surveyed expect goods to cost more due to tariffs and inflation. Half anticipate difficulty finding certain products — up from 44% last year — and 60% say they would consider gifting secondhand or refurbished items, such as books, apparel and home décor, to save money.
Shopping Patterns and Promotions
While the trend toward earlier shopping may be moderating, 42% of consumers began holiday shopping in October, down slightly from 45% last year. Meanwhile, 63% plan to do most of their shopping during Thanksgiving weekend, up from 59% — a shift led by Gen X and older shoppers.
Cullen said uncertainty around the economy and the federal shutdown may be prompting consumers to delay spending until they see stronger promotions. “They don’t expect October deals to be better than what they’ll find later in the season,” she explained. “We could see a more concentrated burst of activity around Thanksgiving and flash deals on top items.”
Mathews added that retailers are navigating a complex environment where consumers demand deep discounts even as tariffs squeeze margins. “Retailers know shoppers are price-sensitive,” he said. “They’ll compete aggressively on key items to drive traffic but may raise prices elsewhere to protect profitability.”
AI’s Growing Role in Retail
Both Cullen and Mathews noted that artificial intelligence is increasingly shaping the retail experience. Consumers are using AI chat tools to search for deals and inspiration, while retailers are investing heavily in AI-driven operations, logistics and workforce optimization.
“AI-related capital expenditures have become a bright spot in business investment,” Mathews said. “That spending is masking some weakness elsewhere in CapEx but is likely to be a positive for productivity heading into 2026.”
Outlook: Resilient but Uneven Holiday Ahead
Despite economic uncertainty, the NRF economists agreed that consumer spending remains the backbone of U.S. growth. “We’re in a consumer-driven economy, and that consumer has both the means and the intent to keep it going,” Mathews said. “If inflation continues to ease and the government shutdown ends soon, we expect a solid — even record — holiday season.”
Cullen added that beyond the numbers, the emotional significance of the holidays remains a stabilizing force. “Even in a complicated economic year, shoppers are determined to keep up their traditions,” she said. “That’s what makes the holiday season so vital — both economically and personally.”
