Americans are expected to open their wallets this holiday season, increasing their gift budgets despite a slowing job market and persistent inflation weighing on consumer confidence, according to a new analysis from Visa Business and Economic Insights.
U.S. consumers are forecast to spend an average of $736 each on holiday gifts, marking a 10% increase from the $669 reported last year. Visa shared these projections in its 2025 holiday spending outlook.
Inflation partly explains this year’s projected sales growth, with the Consumer Price Index showing that prices rose 3% on an annual basis in September. However, Americans are also planning to increase their gifting, especially older consumers. Baby boomers, in particular, are forecasted to boost their holiday spending by 21%, the study found.
The robust spending outlook highlights consumers’ resilience, even as confidence surveys present a more cautious picture.
“We are clearly seeing consumers spend in a far better, more robust way than what we’re seeing in the consumer sentiment and confidence data,” Michael Brown, a principal U.S. economist at Visa, told CBS News.
Visa based its holiday spending projections on retail sales data from the U.S. Department of Commerce, excluding automobiles, gas stations, and restaurants. Historically, changes in consumer spending corresponded closely with consumer sentiment—particularly in the years before the pandemic. However, Visa’s analysis reveals that this link has weakened in recent years.
For example, in April, when consumer confidence fell to its lowest level since the pandemic, real consumer spending actually increased 3.1% on an annual basis, the Visa report points out.
Consumers continue to express dour views about the economy. Sentiment fell for a third consecutive month in October due to concerns about a weaker job market and rising inflation, according to the latest University of Michigan sentiment index. Another measure from the Conference Board, a nonprofit organization, also shows confidence in the economy edged down slightly this month.
What explains this disconnect?
Steady wage gains have kept spending strong, with many Americans continuing to shop despite higher prices because their take-home pay remains solid, Brown explained.
Other holiday outlook forecasts from organizations like Adobe for Business and polling firm Gallup point to the same conclusion as Visa’s: Americans plan to spend billions on holiday gifts, travel, and food, despite their gloomy views on the economy.
Still, some consumers are exercising caution in their purchases. Brown noted that low- and middle-income households will face the biggest tradeoffs this holiday season. Higher costs for essentials such as groceries are limiting their discretionary spending.
“There is absolutely an undercurrent of trying to make the dollar stretch, given some of those necessities are costing a bit more this season,” Brown said.
https://www.cbsnews.com/news/holiday-spending-2025-visa-report-economy-inflation/
