Joe Wadford, economist: “When your bills are up $300, but your wages are only up $100, what are you going to do?”
Holiday spending appears to be rising across the country, but new data shows inflation and uneven income growth are squeezing many American families.
Thanksgiving, Black Friday, Cyber Monday, Christmas, New Year. What with everything going on, the last few weeks of the year are always expensive. The 2025 festive period could be especially costly because inflation is driving up prices across the board.
A booming holiday season... on paper
There are existing statistics that suggest this holiday season is thriving.
For instance, Mastercard predicts a 3.6 percent increase in holiday spending this year compared to 2024, according to CNN. Bank of America reported that shopping for holiday items rose by 5.7 percent from October 2024 to October 2025, along with other figures hinting at a healthy economy.
Numbers, though, can be misleading.
Higher prices, not more shopping
While shoppers are collectively spending more money, a deeper look at the data shows they are spending more simply because prices are higher, not because they are buying more items.
“Holiday shopping is far from full swing, but spending shifts are already surfacing,” explains Mastercard communications director Vicki Hyman. “Inflation is expected to be a larger contributor to sales growth, as opposed to actual sales volume.”
Who is doing the spending?
To get a clear idea of the overall picture, we also need to look at who is driving the spending.
The most recent Beige Book, published by the Federal Reserve, showed that yearly spending among high-end consumers had increased three times as much as spending among lower earners. The latter rose by just 0.7 percent, well below annual inflation, which stands at 3 percent.
“Low income and high income households are often living in two different worlds and experiencing two different economies,” Joe Wadford, a senior economist at Bank of America Institute, tells CNN.
“When your bills are up $300, but your wages are only up $100, what are you going to do?”
Less well off Americans may be more dependent than ever on discounts and promotions this holiday season, but their wealthier counterparts’ lavish spending means this year’s numbers could appear deceptively strong.
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