Holiday spending outlook looks good

Despite inflation, higher gas prices, and other economic concerns, holiday spending, specifically retail sales, are expected to reach $1 trillion this holiday season, according to the National Retail Federation.

That would be a 4.2 percent increase compared with last year’s Christmas season, when sales reached $972 billion and were up 3.1 percent compared with 2024, the Washington, D.C.-based trade association reported.

It would also be the first time that sales have topped $1 billion during the busiest, and most important, time of the year for many retailers.

“We head into the holiday season with strong spending momentum, as consumers remain the bright spot in the economy,” said Mark Matthew, the federation’s chief economist, in a statement. “At the same time, inflation, rising gas prices and pressure on household spending will affect consumers differently across income groups.”

The 2026 holiday shopping season is expected get off to a good start.

Retail sales from Black Friday through Cyber Monday (Nov. 27-30) are expected to top $85 billion, an 8.7 percent year-over-year increase, according to Bain & Company, a Los Angeles-based global management consulting firm.

Cyber Monday is expected to generate $15.1 billion in sales, more than enough to retain its position as the the top online shopping day of the holiday season. An estimated 90 percent of all U.S. consumers say they expect to shop on Black Friday, Cyber Monday, or at a sales event connected to those two days, according to Bain.

As always, discount sales and promotions will play a role in the holiday shopping season, and several major retailers have gotten an early start on trend.

Home Depot and Lowes began their Black Friday promotions at the end of October, while Target and Walmart began some of their Christmas promotions in early to mid-November, rather than waiting until Thanksgiving week.

Discounts will increase nationwide as the season progresses, starting at 14 percent in early November, then building to about 21 percent immediately before Thanksgiving, and hitting 30 percent during Cyber Week, according to Adobe Analytics.

Not every holiday shopping forecast this year is optimistic.

Two out of three shoppers say they plan to eliminate at least one item this year that they usually buy, while a little more than half said the economy will affect their spending, “at least a fair amount,” according to Thrivent, a Fortune 500 financial services organization.

But people are usually more willing to spend money on holiday gifts, so negative surveys about consumer confidence should be viewed skeptically,” said Robert Kleinhenz, a Long Beach-based economic consultant.

“It’s true that some people are expressing dissatisfaction, but they seem to have no hesitation to get out there and spend money,” Kleinhenz said, “I think that we’ll see that happen as we get into the holiday season.”

Even the price of gasoline – an average of $4.06 per gallon nationwide, $5.80 in California – won’t have much of an impact on holiday shopping budgets.

“People have options, and they can an adjust some other aspects of their spending if they have to,” Kleinhenz said. “Yes, the price of gas has gone up, but people can change their spending in other areas to account for that. The exception, of course, is lower income and lower middle income households that live paycheck to paycheck. This might be a more difficult holiday season for them.”

Retailers are planning to hire between 325,000 and 375,000 seasonal workers this year, about the same as were hired one year ago, in line with last year’s estimated 356,000 seasonal hires.

But higher gas prices and interest rates, inflation, and large amounts of consumer debt have forced a “measured” approach to Christmas hiring, the NRF notes.

“This year’s (spending) forecast reflects our confidence that consumers will prioritize the holiday season even as they remain mindful of their budgets,” said Matthew Shay, the federation’s president and chief executive, in a statement. “Retailers are prepared to meet that demand with competitive prices, value and choices for every budget.”

Forty three percent of consumers said they would start their holiday shopping before Nov. 1, according to the federation.

Fifty six percent said the economy will influence their purchases, and 47 percent said they would enjoy receiving gift cards. Clothing (44 percent) and books/ other media (25 percent) were endorsed in the retail federation’s survey.

“Despite its problems, the economy is probably stronger than most people believe it is,” Kleinhenz, said  “Everybody’s worried about affordability and inflation, but when I look at the consumer sector, which is really the flywheel of the economy, it seems to maintains it momentum through thick and thin.

“Purchasing power was increasing earlier and now it’s decreasing a little bit, but we’re not in the danger zone.”

Consumer spending during the first three quarters of the year is not necessarily considered an indication of how much people are likely to spend on holiday gifts and accessories. During that time, household spending spending usually pays for basic necessities – housing, utilities, food, auto repair – while holiday spending is “heavily discretionary, emotional, and tradition-based,” according to Yahoo Finance.

And, even though consumer spending is up from January through September year-over-year, certain factors, like more credit card debt or shopping fatigue, can cause consumers to be more cautious with their spending in November and December.

But Kleinhenz doesn’t see that happening in 2026.

“I think we’re looking at a holiday season that is going to be closer to the NRF forecast than the Challenger Gray & Christmas forecast,” Kleinhenz said. “Disposable personal income was up seven percent in the first quarter and one percent in the second quarter, both year over year. That tells me the over consumer sector is moving forward, not backwards, as we head into the Christmas season.”