After much of the year focused on tariffs and the higher cost of living, Americans are ready to check out and celebrate the holidays. And signs are pointing to some of the deepest discounts seen in years, as stores try to coax shoppers into splurging.
The National Retail Federation, an industry trade group, is forecasting another record season. For the first time, it says, Americans will spend more than $1 trillion on gifts, food and decorations. It's an optimistic prognosis that would mean sales growing by roughly 4%, just like they did last year.
Other estimates by firms that track spending predict spending may be less exuberant; Deloitte's forecast suggests sales will grow around 3%.
Still, this promises a holiday season that's far from the flop many feared early in the year, when President Trump began to launch tariffs on almost all imports.
People are skipping extras — and trading up
Much of the spending in the U.S. has been propped up by wealthier families. Lower-income shoppers are under pressure, tightening their budgets. But regardless of income, shoppers are hunting for deals in a specific way — for quality that matches the price.
At the grocery store, for example, this has been showing up as people refusing to pay more for name-brand groceries and, instead, switching to store brands. Or at Home Depot, people have scaled back on appliances — but when they do buy, they often choose the fancier upgrades with bells and whistles. And so, for the holidays, this could mean splurging on that one top-of-the-line gift.
At Ross Park Mall in Pittsburgh, Marissa McCune, 22, and Logan Koegler, 23, stopped by for an early Christmas present for Koegler: "I was ballin' out with the Apple Watch," McCune says, laughing. The couple left the mall with a second gift, a Stanley cup.
"I graduated and now have a job," said Koegler, a registered nurse. "So now I feel like I'm able to get Christmas gifts that I wasn't able to get before, being a student."
Instead, what people are starting to skip are the small, spontaneous extras — just one more candle or hand cream as a stocking stuffer or self-gift — that they might have bought in a pandemic-era shopping spree.
"Customers have maybe pulled back to not buy some of those add-on items that they would have normally bought," said Jessica Bettencourt, who runs Klem's general store in Spencer, Mass., founded by her grandfather 75 years ago.
"So they're coming in and buying dog food, but maybe not buying two dog toys to go with it," she said. "And it's really hard to tell where those things are that customers are going to make the decision to hold back on."
This could mean better-than-usual sales
This choosiness by shoppers has stores preparing to offer some of the biggest discounts of recent years, to loosen up people's purse strings.
"It'll be greater this year, I guarantee it," Bettencourt said. "There are some categories — like the Christmas trim — that I can already see, it's a little bit slow, so we'll probably discount that much quicker."
For the Black Friday weekend, Adobe Analytics, which tracks online transactions, forecasts discounts in line with last year — up to 28% off, including on electronics and toys. Discounts on clothes are expected to be deeper this year versus last year. Adobe predicts that Black Friday may see the best deals on TVs, toys and appliances.
Worried, but ready to celebrate
One big reason why the tariffs aren't affecting the holidays as much as previously feared is how the Trump administration rolled them out — more slowly than originally threatened. Months of delays and renegotiations gave companies precious time; large retailers in particular stockpiled goods and found ways to keep prices from skyrocketing by either absorbing some of the costs themselves or pushing suppliers to do so.
Plus, people seem willing to spend for special occasions for some holiday reprieve from dim consumer sentiment, which continues to hover near the lowest level in the history of the highly watched monthly survey by the University of Michigan.
Shoppers showed up big for Halloween, which set spending records, and even for back-to-school. Higher-income shoppers are driving much of this spending. Unemployment hasn't soared, and wages are generally still growing faster than inflation. Also, credit card debt has increased, and more people are turning to Buy Now Pay Later.
"As we approach the holidays, we know consumers remain cautious," Target executive Rick Gomez told investors last week, adding that sentiment is "low amid concerns about jobs, affordability and tariffs. Yet they remain emotionally motivated. They want to celebrate with loved ones without overspending."
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