Will Holiday Shopping Spending Increase in 2025?

Will Holiday Shopping Spending Increase in 2025?

The holiday shopping season of 2025 is shaping up to be a record-breaker, with Americans expected to spend over $1 trillion on gifts, travel, and holiday-related items. While this surge in spending seems to tell a story of economic resilience, the reality is more complex. Consumers are heading into the holidays with cautious optimism, but also with rising levels of debt and financial stress. In this article, we will explore the reasons behind the holiday shopping spending increase and what it means for consumers and the retail market.

A Record-Breaking Holiday Shopping Season

Despite the economic uncertainties that have loomed over 2025, holiday retail sales in the United States are projected to exceed $1 trillion, marking the first time this milestone will be reached.

According to the National Retail Federation (NRF), holiday sales are expected to grow by 3.7% to 4.2% compared to last year, which would result in a total of $1.01 trillion to $1.02 trillion in retail spending. This is a strong number, but it represents a slowdown in growth compared to the 4.3% growth seen in 2024.

Moreover, online spending is expected to reach $253.4 billion, a 5.3% increase from the previous year. Cyber Monday alone is set to account for $14.2 billion in online sales. As digital shopping continues to dominate, mobile and social media-driven purchasing is also on the rise. Mobile sales are projected to account for 56% of total online sales this season.

While these figures show clear growth in retail sales, the pace of that growth is slowing compared to previous years, indicating that consumers are becoming more selective and thoughtful about their purchases.

Why Are Americans Spending More?

Despite concerns about inflation and high living costs, many consumers are willing to spend more on holiday shopping gifts and celebrations. The holiday shopping spending increase is driven by a few key factors:

1. Rising Consumer Confidence: While economic conditions remain challenging, consumer confidence is higher than expected. Americans are still willing to indulge in holiday shopping to maintain festive traditions, even if it means taking on some debt.
2. Discounts and Early Shopping: Retailers have extended sales events and promotions, encouraging earlier spending and boosting the holiday shopping spending increase. With deeper discounts and promotions, consumers feel more comfortable splurging on gifts.
3. E-commerce and Mobile Shopping: The growth of online shopping, including mobile purchases, has driven a significant portion of the holiday shopping spending increase. Consumers are choosing the convenience of shopping from home, contributing to higher retail sales numbers.

Rising Debt: Spending Beyond Means

While the holiday shopping spending increase is positive for retailers, it has come at the cost of rising consumer debt. According to a recent survey by the American Institute of CPAs (AICPA), nearly 47% of Americans plan to take on debt this holiday season.

Among those, many will rely on credit cards to fund their purchases, with 52% of credit card users saying they do not expect to pay off their holiday balances in full. The younger generation, especially those between 18 and 34, is particularly susceptible to this trend, with 64% of young adults expecting to incur holiday debt.

The story of holiday spending in 2025 is, therefore, a paradox. While many Americans are enjoying the holiday season and indulging in gifts and celebrations, they are doing so at the expense of their future financial well-being. In fact, 79% of respondents plan to use credit cards, and many anticipate that their holiday spending will continue to contribute to their debt load well into the new year.

The Spending Divide: Income and Age Matter

The increase in holiday spending isn’t evenly distributed across all income groups. Higher-income households are driving much of the growth, while lower-income families are struggling more. According to a report from The Washington Post, higher-income households, especially those earning over $150,000 annually are increasing their spending by around 3% compared to last year. On the other hand, lower-income households, earning below $40,000, have reduced their spending during the holiday season by about 2%.

This income divide is crucial in understanding the broader picture of holiday spending. While overall sales numbers are up, they reflect significant disparities between the spending power of different income groups. Higher-income earners are more likely to spend freely, while lower-income groups are focusing more on essentials and seeking ways to cut back during the holiday period.

The Debt Trap: Credit Cards and Buy Now, Pay Later Schemes

A notable trend this holiday season is the increased reliance on credit options, particularly Buy Now, Pay Later (BNPL) services. In fact, Americans are expected to spend a record $20 billion using BNPL services this holiday season. This surge in credit spending is a double-edged sword. On the one hand, BNPL schemes allow consumers to spread out the cost of holiday gifts over time, making it easier for them to afford higher-priced items. On the other hand, these services come with the risk of high-interest rates, late fees, and the possibility of accumulating debt that consumers may struggle to pay off in the coming months.

The trend of relying on credit cards and BNPL is particularly concerning given that many Americans are already feeling the financial pressure of rising prices for basic goods and services. This financial tightrope walk where consumers continue to spend heavily on Christmas gifts while simultaneously taking on more debt. This highlights the delicate balance between festive spending and financial responsibility.

Why Are Americans Spending Despite Rising Debt?

At the heart of this holiday shopping surge is the emotional pull of the season. Many Americans are motivated by a desire to make their holiday special for loved ones, despite the financial strain. According to the AICPA survey, nearly 25% of respondents admit that they will not stick to their holiday budgets, despite knowing that they should. The pressure to give gifts, host gatherings, and maintain holiday traditions is powerful, and for many, it outweighs the financial consequences.

This emotional spending is compounded by the fact that many people view the holidays as an opportunity to bring joy to their families, even if it means going into debt. The act of gift-giving, especially for those who may not be able to afford it, has become a hallmark of the season, driven more by social norms and emotional connections than by financial reality.

What This Means for Retailers, Markets, and Consumers

For retailers, this surge in holiday spending presents a clear opportunity. Retailers who offer attractive discounts, personalized services, and seamless online shopping experiences are well-positioned to capture the lion’s share of consumer spending. As the demand for online and mobile shopping continues to rise, businesses that can leverage these channels effectively are likely to see continued growth.

However, the broader economic impact is more mixed. While retail sales are strong, the increasing reliance on credit and debt to fund these purchases raises questions about consumer financial health in 2026. The potential for a post-holiday financial hangover is real, with many Americans likely to face higher credit card bills and the risk of entering the new year with significant debt burdens.

For traders and investors, the holiday shopping season offers insight into consumer behavior, credit trends, and overall economic sentiment. The data from this year will likely provide key signals for the broader retail and financial sectors, with potential implications for the stock market and consumer-driven industries.

A Season of Spending and Strain

The 2025 holiday shopping season is set to break records, but this surge in spending comes with rising debt and financial strain. As we continue through the holiday season, the holiday shopping spending increase will likely continue to drive strong sales numbers for retailers. However, it’s important to recognize that this spending may come with long-term consequences for many consumers who will carry debt into the new year.