Retailers look to record holiday sales, despite weak consumer sentiment

The latest readings from both major U.S. sentiment gauges show consumers are unusually downbeat.

The University of Michigan’s Index of Consumer Sentiment fell to 51.0 in November 2025, down from 53.6 in October and 71.8 a year earlier—a 29% year-over-year drop and close to the second-lowest reading on record. Households continue to report that high prices and weakening incomes are weighing on their finances, even after the federal shutdown ended.

At the same time, The Conference Board’s Consumer Confidence Index dropped 6.8 points in November to 88.7 (1985=100) from 95.5, its lowest level since April. In addition, the Present Situation Index slid to 126.9, and the Expectations Index fell to 63.2—below the 80 threshold that historically signals elevated recession risk. It marks the 10th straight month in that danger zone.

Together, these indicators suggest consumers are pessimistic about both current conditions and the outlook for jobs and income, raising concerns about the durability of household spending going into 2026.

However, University of Michigan data and other sources show notable differences across groups. Republicans and higher-income households report feeling much better about the economy than Democrats and lower-income households.

The Federal Reserve Bank of Dallas recently analyzed consumption shares for the most affluent consumers. According to its findings, the top 20% of earners accounted for an average of 57% of overall consumption from 2020 to the second quarter of 2025.

FIGURE 1: CONSUMPTION SHARE OF TOP 20% OF EARNERS HAS GROWN SINCE THE 1990S

% of total

Bar chart comparing the top 20% of earners’ share of income, net worth, and consumption in the 1990s and 2020s.

Sources: Federal Reserve Board, Bureau of Economic Analysis, author’s calculations

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Record sales forecast for the 2025 holiday season

The business press has widely highlighted expectations of record-breaking holiday sales—though some analysts note that higher prices account for part of the projected gains.

CNN recently reported,

“US retail sales on Black Friday, the busiest shopping day of the year, climbed 4.1% compared with last year, according to data released Saturday by Mastercard SpendingPulse. Online shoppers alone spent $11.8 billion, up 9.1% from 2024, according to data collection platform Adobe Analytics.

“But those gains don’t account for higher prices due to inflation, so actual spending could be flat.

“‘We have 3% inflation, so maybe (the 4.1% increase in spending) is a real increase of just 1% or so, which is not that much of an increase,’ Rick Newman, who writes The Pinpoint Press, a newsletter on the US economy, told CNN on Friday.”

The National Retail Federation (NRF) expects holiday sales to top $1 trillion for the first time. Matthew Shay, NRF president and CEO, emphasized that outlook in the organization’s recent press release:

“American consumers may be cautious in sentiment, yet remain fundamentally strong and continue to drive U.S. economic activity. … 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.”

FIGURE 2: HOLIDAY SALES ARE EXPECTED TO INCREASE BETWEEN 3.7% AND 4.2% OVER 2024

Historical holiday sales (in billions)

Bar chart showing U.S. holiday retail sales from 2005 to 2024 with the NRF’s 2025 forecast of 3.7% to 4.2% growth.

Sources: NRF, U.S. Census. Non-seasonally adjusted retail sales.

Data and business intelligence platform Statista compared this year’s holiday sales estimates with those of other major holiday shopping occasions in 2025.

FIGURE 3: HOLIDAY SPENDING TO HIT RECORD HIGH

Average expected per-capita spending ($s) on holiday/seasonal events

Bar chart showing expected 2025 per-capita spending for major seasonal events, with winter holidays exceeding $1,000 and all other categories showing year-over-year increases.

Sources: Statista, NRF, Federal Reserve

Statista states,

“While the holiday season just started with Thanksgiving this Thursday, American consumer spending for the end of the year is set to reach a record high. According to data from the National Retail Federation, the average per capita budget for the 2025 winter holidays (Nov. 1 – Dec. 31) is expected to exceed $1,000, a 4 percent increase from 2024 ($976). As our infographic shows, consumer spending during other major seasonal events was also on the rise this year, from a 2 percent increase (Mother’s Day, Valentine’s Day) to a 10 percent increase (Halloween), according to estimates.

“Yet, those eye-catching averages hide national disparities: while affluent households are expected to splurge even more than in previous years, many lower-income families face stagnant (or even shrinking) holiday budgets, amid economic uncertainty and persistent inflation. In its outlook published last September, the Federal Reserve maintained its forecast of a 3 percent inflation rate in the United States in 2025, signaling ‘ongoing caution about price pressures and labor market stability.’”