Multiple retail forecasting firms project strong holiday spending growth despite economic headwinds and consumer caution. Bain & Company estimates holiday sales will surpass $1 trillion for the first time, representing 4.5% year-over-year growth, with brick-and-mortar stores accounting for approximately 70% of sales while e-commerce continues expanding its market share.
The spending outlook is supported by elevated tax refunds, which have increased by $43 billion or 17% compared to the prior year, providing additional purchasing power. However, analysts note that roughly half of this benefit has been offset by rising gasoline costs, which have strained household budgets. The headline growth figures are substantially driven by inflation rather than unit volume expansion, with categories including food and beverages, furniture, and health and personal care products experiencing declining unit sales despite rising prices.
Consumer sentiment remains mixed heading into the season. The Conference Board reported that confidence declined to its lowest point since 2014 in September, with respondents citing concerns about inflation and employment conditions. Meanwhile, recent Federal Reserve data showed consumer prices increased at a slower-than-expected pace, with the 12-month gain reaching 3.4% versus economist expectations of 3.7%.
Retail forecasters including Deloitte project total holiday sales reaching $1.7 trillion and anticipate significant shifts in shopping behavior. Consumers are demonstrating heightened price consciousness across income levels, switching between brands and retailers while seeking promotional discounts. Buy now, pay later financing is expected to reach record levels at $21.3 billion as shoppers become more intentional about expenditures. Shopping patterns are also changing, with consumers making smaller basket purchases but visiting stores more frequently, particularly for groceries, while shifting toward private-label products and higher-quality individual items.
Artificial intelligence is emerging as a notable trend in holiday shopping. PwC data indicates 29% of consumers plan to use AI in their shopping decisions, up from 22% the previous year. However, the technology is primarily serving informational purposes, with 75% using it for product research and 55% for price comparisons, while direct purchases through AI platforms remain limited.
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