For the first time in U.S. history, holiday spending is predicted to reach just over $1 trillion in 2025, according to the National Retail Federation. The estimated growth in November and December is expected to be 3.7 percent to 4.2 percent higher than last year. Last year, total holiday spending came in at $295.1 billion.
“Much of that increase is due to inflation, with volume staying relatively flat,” says Senior Lecturer and Economics Program Coordinator Allison Kaminaga, Ph.D.
Despite higher-than-ever projections, “The NRF’s consumer survey found that, on average, consumers are expected to spend $890 on holiday gifts, food, and decorations, which is slightly less than they spent last year ($902),” says Kaminaga.
Consumer sentiment is down sharply due to continued inflation and uncertainty surrounding tariffs, the labor market, and economic factors, says Kaminaga, which is why some households are pulling back this holiday season. But others — especially higher-income households — are planning to spend more, driving much of the projected overall growth.
KPMG finds that households with incomes above $200,000 are expected to increase their holiday spending by 9 percent while households with incomes below $50,000 are expected to lower their holiday spending by 2 percent.
Additionally, the gap is widening between generational spending. While Baby Boomers are expected to increase their holiday spending by 5 percent compared to 2024 levels, Gen Z is cutting back significantly and reducing their holiday budgets by 23 percent, according to PwC.
“Consumers this year are seeking out value. For example, we are seeing an increase in shopping at discount retailers and outlets, and consumers are also using AI tools to help them find the best deals,” Kaminaga says.
KPMG’s holiday shopping survey reports that consumers are spending more on experiences, with travel spending expected to increase 10 percent compared to last year, while gift budgets have fallen. Shoppers are also prioritizing events and family gatherings – with food emerging as one of the top gift categories.
“Given economic uncertainty and issues with affordability, these trends show that consumers want to spend their holiday budgets on meaningful experiences,” Kaminaga says.
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There are also differences in payment methods across generations.
“Gen Z’s top payment preference is Apple Pay, which they use at over twice the rate of the general population. Younger generations are also more likely to travel during the holiday season,” she explains.
With the rise of Buy Now, Pay Later, Kaminaga notes that this payment method isn’t significantly shaping holiday spending patterns. Buy Now, Pay Later makes higher priced items more appealing to price sensitive consumers, leading to higher demand and sales for retailers; however, it comes with risks. For example, a study conducted by economists at Harvard Business School found that Buy, Now Pay Later results in higher overall spending and increases the risk that consumers face negative outcomes associated with low liquidity, for example overdraft fees.
“In PwC’s Holiday Outlook Survey, only 9 percent of respondents reported Buy Now, Pay Later platforms as their preferred payment method for holiday spending,” Kaminaga says.