The upcoming holiday season is expected to be a mixed bag for retailers, with high-income consumers driving spending while others struggle with financial pressures. Oxford Economics forecasts holiday retail sales to rise 4.2% in dollar terms and 2.2% in volume after adjusting for inflation. This marks an improvement over last year's volume, which was impacted by tariffs and early October purchases, but it still falls short of typical holiday season performance due to higher energy prices.
Several factors are contributing to the uneven spending landscape. High inflation is suppressing real disposable income growth, elevated diesel prices are increasing shipping costs, and Federal Reserve rate hikes are making credit card borrowing more expensive. Despite these challenges, high-income consumers are expected to maintain strong spending levels, supported by this year's surge in equities.
Oxford Economics research indicates that recreational goods and services, household furniture, and clothing are likely to benefit most from this positive wealth effect. The holiday season will remain deeply divided, with affluent shoppers supporting overall spending while others face financial constraints.