Retailers and merchants are preparing for a holiday season that may resemble two distinct segments in 2025. The performance of businesses, particularly those targeting higher-income consumers or located in affluent regions, is expected to be relatively better. ADP reports average salary increases between 4.5% and 6.7%, depending on job stability. Despite market fluctuations, stock indices have risen over 13% this year, with high household incomes in cities like New York, Boston, Washington, D.C., and San Francisco surpassing the national average by nearly $41,000.
In more upscale areas, dining establishments and hotels are reportedly thriving, evidenced by high prices and full reservations. However, the circumstances for lower-income consumers appear less favorable. Paychex notes that wage growth for blue-collar workers has lagged below 3%, currently sitting at 2.58%. Credit rating analysis from KBRA indicates that the wealthiest decile of earners drives half of consumer spending, while the remaining majority is less likely to indulge in holiday purchases due to higher costs, credit card debt, and economic uncertainty.
Major retail sales surveys indicate cautious optimism. An S&P Global Ratings report forecasts a 4% increase in holiday sales from 2024, although much of this growth may stem from inflation rather than actual sales volume. Deloitte also projects a sales increase of between 2.9% and 3.4%, which is below both last year’s growth and the 10-year average.
Experts suggest that current trends reflect a divided economy: wealthy consumers are continuing to spend, while lower-income groups are facing significant challenges, as seen in recent earnings from major dining chains and rising unemployment rates among recent graduates. The upcoming holiday season remains critical for small businesses, where holiday sales comprise a significant portion of annual revenue. The outcome for these businesses will largely depend on their target demographic and locations.
Source: https://www.theguardian.com/business/2025/nov/30/tale-of-two-holiday-seasons-us-economy