The holiday shopping season seems to start earlier every year, with promotions now arriving shortly after Halloween decorations are taken down. This year, retailers stretched Black Friday and Cyber Monday into an entire month, with consumers embracing early deals to manage budgets and avoid missing out on discounts.
The stock market pays close attention to this stretch of the calendar. Holiday sales represent a meaningful portion of annual retail activity, and strong results are often interpreted as a sign that consumers feel confident enough to spend. However, this year’s record numbers require more careful reading.
A Strong Start … At First Glance
Early data from Black Friday and Cyber Week suggest a robust kickoff to the season. Overall sales rose +7.7% compared to last year, with U.S. consumers spending a record $14.3 billion on Cyber Monday alone according to Adobe Analytics. Across the full weekend, online purchases totaled more than $44 billion.[1]
Beyond the dollar amounts, another notable trend is the rise of AI-assisted shopping. Reports highlighted that AI-driven traffic to U.S. retail sites surged more than 800% compared to last year, driven by new consumer-facing tools like Walmart’s Sparky and Amazon’s Rufus, as well as the widespread use of large language models for gift ideas and price comparisons.[2] This marks a structural shift in how shoppers navigate the season as new tools allow consumers to find items faster or search more efficiently for steep discounts.
At face value, these numbers suggest resilient consumers, and ongoing economic momentum. Markets tend to see higher spending as a positive signal, but looking beneath the headlines tells a more nuanced story.
Inflation is Inflating the Numbers
Retail spending is measured in dollars, not items. This means rising prices can make sales appear strong even when households are stretching to buy essential items.
To highlight this phenomenon, data from Bank of America shows that household spending on holiday items surged +5.7%, yet retail transaction volumes have actually declined in 2025.[3] A detailed breakdown from Adobe Analytics echoes this pattern. Thanksgiving Day and Black Friday both saw record-high spending online, yet total order volume fell 1% year over year, while average selling prices increased 7%.[4] This data reinforces something that many households are experiencing firsthand: Americans are paying more but not necessarily buying more.
Consumers don’t need to look hard to find evidence of inflation this time of year, with a recent analysis showing that 78% of core holiday staples cost more than last year.[5] In addition to gifts being more expensive, the food and beverages needed to host holiday gatherings have climbed meaningfully as tariffs and inflation ripple through the economy. Higher sales are positive for markets and companies, but it’s important to acknowledge that headline numbers are being pulled upward by inflation as households pay more to check the same items off their shopping lists.
K-Shaped Holiday Season
Holiday spending offers a window into the financial mood of American households, and this year it underscores the growing divide in what analysts are calling a “K-shaped” economy – one in which different groups move in opposite directions.
On one side, higher-income households are benefiting from stable employment, strong portfolio gains over the past two years, and fixed housing costs that shield them from some impacts of inflation. While these households are experiencing some challenges, they are continuing to spend on travel, dining, and gifts, contributing to the overall rise in holiday sales.
On the other side, low- and middle-income consumers are navigating a different set of challenges according to the Federal Reserve’s latest Beige Book report.[6] These households are feeling the full effect of rising prices for essentials like health insurance, utilities, and childcare, which leaves less breathing room for discretionary items. They are relying on discounts and, in some cases, turning to short-term financing tools like “buy now, pay later” services to make seasonal purchases.
Both of these realities exist at once, and the aggregate data blends them into a single headline. The risk when interpreting recent holiday sales as a pure measure of consumer strength is missing the fact that economic gaps are widening.
Staying Grounded Amid the Seasonal Noise
The holidays are a moment of generosity and celebration, but they also represent a time of economic pressure for many households. Strong spending numbers can offer useful information, but should be understood within the broader context of inflation and household budgets.
For those who are feeling the cumulative effect of higher prices this year, it is a good moment to revisit your financial plan and ensure that spending and investment decisions align with what matters most to you and your family. From a long-term investment perspective, this period is ultimately short-term noise. A single shopping season, whether strong or weak, shouldn’t alter your financial plan or the allocations within your diversified portfolio.
At North Berkeley, we partner with our clients to navigate these periods of inflation and heightened uncertainty. The goal is not to react to every headline, but to stay grounded – through the holidays and throughout the year.
Resources
[1] US holiday shoppers shake off economic blues for online spending spree. Reuters
[2] AI helps drive record $11.8 billion in Black Friday online spending. Reuters
[3] Consumer Checkpoint: Holiday prep or schlep? Bank of America Institute
[4] Black Friday Spending Raises Eyebrows Over US Economy. Newsweek
[5] Study: 78% of holiday staples cost more in 2025 as tariffs push inflation higher. Bankrate
[6] Fed’s Beige Book Shows K-Shaped Split Deepens Among Consumers. Bloomberg
