US holiday shoppers bring more cheer for retailers this year

Adjusting for inflation, the forecast is for holiday sales volumes to lodge a decent gain. Our view is underpinned by strong household balance sheets, in aggregate, and the stock market surge. This disproportionately benefits spending power for high-income and older households and will more than compensate for a slowdown in spending from younger and lower-income households.

• We forecast holiday retail sales to be 4.6% higher than a year ago in dollar terms, and 1.6% higher than last year in volume terms.
• The gain in volume would be the strongest since 2021, and not far below the 1.8% average growth seen in 2015-2019.
• Holiday spending growth will be concentrated online, with in-store sales lagging.
• Consumers began gift searches early this year to preempt tariff impacts, reinforcing the trend of spending throughout the holiday season due to early promotions and extended discount periods.