Thanksgiving has vanished faster than the Democratic National Committee’s cash reserves. Everyone enjoyed a slice of tofurkey and a piece of rhubarb pie. Uncle John and cousin Brad lost their voices after fighting over the One Big Beautiful Bill for four hours and 20 minutes. Dad is in the backyard, pondering the Roman Empire, while the kids are yelling “Six, seven” at each other. This was Thanksgiving 2025. Now the world is entrenched in the Christmas season, or as William Shakespeare wrote in Henry V, "Once more into the breach, dear friends, once more." As Black Friday falls upon us, what are the economic conditions behind America's biggest shopping day?
Shopping on Christmas
The National Retail Federation anticipates Christmas 2025 will be the biggest yet. In a recent report, the association projected that total holiday retail sales will climb between 3.7% and 4.2% year over year. After crunching the numbers, Christmastime transactions will reach $1 trillion for the first time. That is a lot of money. Merry Christmas, Walmart!
Wait a minute. Isn't everyone gloomy and upset over current economic conditions? The University of Michigan's November Consumer Sentiment Index cratered to the second-lowest on record, while the Conference Board's Consumer Confidence Index tanked. Perhaps it is a case of the Biden-era vibecession, or facts trumping feelings. Still, the group's president and CEO, Matthew Shay, says consumers will be pounding the pavement – or their keyboards, mice, or touch screens.
"American consumers may be cautious in sentiment, yet remain fundamentally strong and continue to drive U.S. economic activity,” Shay said in a statement. “We remain bullish about the holiday shopping season and expect that consumers will continue to seek savings in nonessential categories to be able to spend on gifts for loved ones.”
Indeed, various surveys suggest shoppers will be spending a large chunk of change. New data from the BMO Real Financial Progress Index suggests 62% of Americans will shell out $2,800 this Christmas, up 60% from last year. Uh, come again? Well, if that seems a little too generous, a recent Gallup poll found the average tally this year will be a little more than $1,000, virtually unchanged from 2024.
Generation Z will showcase to the world that it is ready to take on the responsibility of giving the US economy, which is two-thirds consumption, a modest boost. A new Deloitte survey discovered that Gen Z shoppers will spend $20 for every $100 spent, up 400% from a year ago. Because the government shutdown is likely to shave off some of the fourth-quarter gross domestic product, the young whippersnappers will do the Baby Boomers and Gen Xers proud. We salute you.
So much for tarifflation fueling end-of-year anxiety.
Tariffs on Aisle Nine
Are tariffs eating away at the Christmas spirit? Somewhat. The ghost of protectionism has caused aggregate inflation to tick up at a modest pace – the headline annual inflation rate is 3%, roughly the same as last year – quite different from what economists had prognosticated on Liberation Day in April. Suffice it to say, Santa Claus is still coming to town, but he will have to navigate the landscape of import taxes and non-tariff trade barriers.
Of course, isolated stories are unfolding across the United States.
Artificial trees will cost an estimated 10% to 20% more this season than last year because of tariffs. Bankrate says 78% of holiday staples will be more expensive this year. Seeing these reports, even when households were planning their Christmas crusade in the summer, it is no wonder that Bankrate found that 41% of consumers are worried that gifts will be more expensive this year.
But the reason why the situation is not spiraling out of control is that importers accelerated their purchases of foreign goods, including seasonal items, ahead of the tariffs in the first quarter. In other words, they are well-stocked and enjoy plenty of inventory. Will next year’s festivities be different? It all depends on a broad array of factors, such as whether companies shift their supplies domestically and whether the administration’s trade agreements yield tangible results.
For now, it is safe to say that levies are adding a few more pennies to price tags. However, it is not the inflation that economic observers hyperventilated about earlier in the year.
Bah Humbug!
Shoppers will scan, swipe, and tap a bit more reluctantly this year. Nobody knows what the US economy will bring in the year ahead. Uncertainty has been the name of the game for much of 2025. While economists purport that 2026 will not be indistinguishable from the current climate, Americans’ skepticism and consternation are warranted. Remember, they are still reeling from the 20% inflation bomb, the 30% increase in home prices, and the highest level of interest rates in three decades.
Instead of Santa Claus tracking his muddy boots all over the living room floor, let’s give the consumer a break with some milk and cookies and a VHS copy of Die Hard. Bah humbug!
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