The Resilience of the American Consumer

This unexpected strength in consumer spending is particularly noteworthy given the mixed signals from consumer confidence surveys. While sentiment remains cautious, actual spending patterns paint a different picture. Matthew Shay, President and CEO of the NRF, described the growth as a “sharp surge,” emphasizing the continued willingness of consumers to spend on loved ones during the holidays. “Continued economic momentum helped land 2025 holiday sales near the top of NRF’s forecast, reaffirming that consumers remain on solid footing,” Shay stated.

The gains were broad-based, with all nine major retail categories experiencing monthly increases. Year-over-year gains were observed in six of those categories, led by strong performances in clothing, sporting goods, and digital products. This diversification suggests a widespread appetite for goods across various sectors, rather than a concentrated boost from a single area.

Data from multiple sources corroborate the NRF’s findings. Adobe reported a record $257.8 billion in online spending between November 1st and December 31st, a 6.8% increase over the previous year. Visa Consulting & Analytics estimated a 4.2% rise in total holiday spending, encompassing all payment methods, from November 1st through December 23rd. Mastercard’s SpendingPulse data indicated a nearly 4% increase in both in-store and online retail sales from November 1st to December 21st, highlighting a blend of shopping behaviors.

Michelle Meyer, Chief Economist at the Mastercard Economics Institute, noted that “Consumers demonstrated flexibility and confidence this season,” adapting to promotions and seamlessly integrating online and brick-and-mortar shopping experiences.

The Economic Impact of Consumer Spending

Consumer spending remains the bedrock of the U.S. economy, accounting for approximately two-thirds of overall economic output. The strong holiday performance contributed to a robust third quarter, with real Gross Domestic Product (GDP) rising 4.3% year-over-year, driven by increased exports and, crucially, strong consumption.

Looking ahead, economists are cautiously optimistic about continued growth in 2026, with consumer spending identified as the key determinant. Brian Moynihan, Chairman and CEO of Bank of America, observed that despite softening confidence readings, consumer demand remains remarkably steady. “At the end of the day, people are spending. They have good credit quality. They are employed… it’s pretty solid right now,” he commented. Bank of America’s internal data showed a greater than 4% year-over-year increase in consumer spending during the Thanksgiving-to-early-December period.

However, Moynihan also cautioned that the sustainability of this growth hinges on continued consumer engagement. “The real question is—will the consumer keep spending in the U.S.?” he asked, adding that Bank of America economists have significantly upgraded their 2026 growth forecasts to 2.4%, a substantial increase from the 1.5% predicted just four months prior.

The Atlanta Federal Reserve’s GDPNow model initially estimated fourth-quarter real GDP growth at 5.4% on January 8th, before a slight revision to 5.1% following the release of U.S. Census Bureau data indicating a contraction in residential investment. Fitch Ratings also upgraded its outlook, citing stronger-than-anticipated momentum in the second half of 2025, now projecting U.S. GDP growth of 2% in 2026.

Despite these positive indicators, sentiment remains mixed. The Conference Board’s Consumer Confidence Index dipped to 89.1 in December, although expectations for future household finances improved, and inflation expectations eased. The labor market continues to cool, with the economy adding 50,000 jobs in December and the unemployment rate falling to 4.4%.

Did You Know? Consumer spending accounts for roughly 68% of the United States’ economic activity, making it a critical indicator of overall economic health.

As we move further into 2026, economists will be closely monitoring upcoming data releases to assess whether the positive momentum observed during the holiday season will persist and continue to drive the U.S. economy forward. Will rising interest rates eventually curb consumer enthusiasm, or will the strong labor market and resilient household balance sheets continue to fuel spending? And what impact will geopolitical events have on consumer confidence and spending habits?

Frequently Asked Questions About Holiday Spending

1. What factors contributed to the strong holiday spending in December? The strong holiday spending was driven by a combination of factors, including a robust labor market, resilient household balance sheets, and a willingness among consumers to spend on friends and family despite economic uncertainties.
2. How does holiday spending impact the overall US economy? Holiday spending is a significant driver of US economic growth, accounting for a substantial portion of fourth-quarter GDP. A strong holiday season often signals continued economic momentum into the new year.
3. What is the current outlook for consumer spending in 2026? Economists are cautiously optimistic about consumer spending in 2026, but emphasize that it remains the key determinant of overall economic growth. Forecasts have been upgraded, but risks remain.
4. What is the role of online shopping in the recent spending surge? Online shopping played a crucial role, with Adobe reporting a record $257.8 billion in online sales during the holiday season. This demonstrates the increasing importance of e-commerce in consumer spending patterns.
5. Are consumer confidence levels aligned with actual spending patterns? Consumer confidence levels remain mixed, but actual spending patterns have been surprisingly strong. This suggests that consumers may be cautious in their outlook but continue to spend nonetheless.