With Black Friday looming, holiday shoppers could deliver a jolt to the U.S. economy, as consumer spending is expected to grow — the result of higher prices and, for some anyway, growing consumer confidence.
Retail sales in the U.S. grew again, about 0.4% from September to October, according to the latest monthly estimates from the U.S. Census Bureau, offering optimism for a robust holiday season. Retailers and consumer packaged goods manufacturers are both bullish on volume sales growth this holiday season and beyond, according to the latest Advantage Outlook report.
The big picture, however, is a bit more complex: Lower- and middle-income shoppers pinched by higher prices continue to seek value as they manage grocery prices that remain significantly above pre-pandemic levels. And on the upper end of the economic spectrum, higher-income consumers’ increasing use of GLP-1 drugs, such as Ozempic and Wegovy, is suppressing demand in some food categories — a relatively new trend that retailers and CPG companies are monitoring closely.
“We’re seeing a resilient consumer, but at the same time, (retail sales remain) a little bit sluggish, especially in … food and personal care,” Advantage Solutions CEO Dave Peacock said in a recent interview on the Bloomberg Intelligence radio segment and podcast. “What we see is lower-income consumers are really strained in this economy.”
Many are still struggling to make ends meet, even as wage growth has largely caught up to inflation, Peacock said.
In response, more consumers this holiday season are seeking to offset higher prices by turning to private brands for value and buying bulk items to split with family and friends, according to Advantage’s recent research on Thanksgiving shopping.
Continued (or new) cost pressures on lower- and middle-income shoppers also could affect sales of items such as snacks, sodas and other non-essential treats and indulgences, which tend to expand and contract based on the economy.
Consumers across income levels also continue to seek value by shifting from traditional grocery stores to value and club stores, Peacock said. Earlier this month, for instance, Walmart specifically cited households making more than $100,000 as the key driver for its quarterly same-store sales and profit growth.
Nonetheless, higher-income households are expected to spend more this holiday season compared to last year, according to a recent Morgan Stanley report titled “Holiday Shopping: A Little More Holiday Cheer?”
With inflation abating, Morgan Stanley economists expect that growth in real holiday spending “will be stronger than growth in nominal spending when compared to last year,” according to the report. “Higher-income consumers will likely still drive the strength.”
Still, with this year’s compressed holiday shopping season (which spans just 27 days between Thanksgiving and Christmas), how the final tally shakes out will be worth watching.
“It will be interesting to see how supply chains hold up relative to a more compressed demand,” Peacock said in the Bloomberg interview.
Many shoppers have already begun checking off items on their lists with a bevy of early promotions in October from retail giants such as Amazon, Walmart and Target. According to Advantage research, 64% said they would shop earlier than usual to pounce on deals.
That could translate into another uptick in retail sales for November.
Whatever comes, Advantage stands ready to help brands and retailers navigate, Peacock said.
“As inflation continues to abate, you should see growing consumer confidence” in the months ahead, Peacock said. “From a broad industry standpoint, I’m optimistic — especially as we get into the second half of 2025.”
