The Mastercard Economics Institute (MEI) has released its 2025 U.S. and Canada holiday forecast, and while festive spirits are high, spending will be shaped by inflation, tariffs, and consumers’ drive for smarter, value-based choices. The report, published on September 22, 2025, anticipates total U.S. retail sales (excluding autos) to rise 3.6% year-over-year from November 1 to December 24, while Canadian retail growth is expected at 2.8%. Within that, U.S. online sales are forecast to grow 7.9%, far outpacing brick-and-mortar’s 2.3% growth, underscoring the continued strength of e-commerce.
“Consumers will continue spending with holiday sales of 3.6% yoy. E-commerce will continue to drive the growth as consumers look for deals,” said Michelle Meyer, Chief Economist at MEI. Inflation, Mastercard’s analysts note, will fuel a larger share of the spending increase than raw sales volume itself. Tariffs on goods such as clothing, toys, and décor are adding complexity to pricing, forcing retailers to decide whether to absorb costs or pass them on to consumers, creating highly competitive pricing battles across sectors.
Shopping Smart: Budgets, Gift Cards, and Flexibility
When prices rise, shoppers adapt, and in 2025, that means gift cards are back in fashion. MEI observes that gift card usage will surge sharply this year as buyers seek ways to maintain generosity without overextending budgets. “Gift cards don’t eliminate inflation, but they can help gift givers be generous while navigating rising prices,” the report explains. Roughly one-third of all gift card spending happens in December and January, meaning the economic ripple will reach into 2026. Certain retail sectors—such as toy stores and beauty and wellness —see most of their annual gift card activity during these months.
Gift cards also offer retailers deferred revenue and an opportunity to re-engage customers post-holiday, creating loyalty retention beyond the festive period. In the blending of value and vibes, classic gift giving is being replaced with more flexible, choice-driven gifting strategies.
Health, Fitness, and Experiences: The Holiday’s Hottest Categories
Alongside gift cards, MEI highlights an exceptional rise in tech-driven health and wellness products, a category growing 30% annually from 2023 to 2024, significantly outpacing traditional gym memberships, which grew at only 5%. From smart fitness trackers and AI-enabled mirrors to gym equipment with built-in health diagnostics, consumers are making health-conscious spending choices.
In Canada, shoppers are pivoting toward experiential spending, favoring travel, dining, and leisure over physical gifts. Mastercard attributes this to inflation, making tangible goods more expensive, and experiences providing higher perceived emotional value.
Gen Z and the Social Media Shopping Surge
Social media remains one of the strongest engines of retail growth, particularly among Gen Z. The Mastercard analysis shows spending on viral teen and tween fashion brands surged 25% year-over-year in the U.S. over the past six months, far surpassing the overall 5% rise in apparel sales.
Ten of the fifteen U.S. counties seeing the highest social media-driven fashion sales were clustered around major college towns such as Ohio University and Indiana University, underscoring how youth culture and campus fashion create new consumer waves every season.
This rise perfectly aligns with broader market data from eMarketer, showing mobile commerce will drive over 90% of the net increase in holiday e-commerce sales this year, driven by integrated checkout experiences on platforms like TikTok Shop and Instagram.
Tariffs and Inflation: Shifting Retail Strategy
The looming impact of tariffs adds uncertainty to this year’s forecast. Items such as clothing, toys, jewelry, and Christmas décor already face higher rates than last year, forcing retailers to find creative ways to maintain pricing competitiveness. Analysts from Yahoo Finance and Reuters agree: inflation and tariffs together are the two biggest headwinds this season. Savvy shoppers may adapt in clever ways, pointing out that many consumers will trade down or switch categories, but still indulge strategically in the brands and items that matter most.
This rebalancing reflects what MEI calls the Value and Vibes holiday mindset. Value-seeking shoppers will flock toward categories like home essentials, while vibe-seekers will lean into luxury self-care, travel, and gifting experiences. Retailers that can address both emotional and financial needs, through targeted digital promotions, experiential bundling, and convenient return infrastructures, will win the season.
Final Thoughts
The 2025 holiday shopping season will be one of calculated joy—where consumers balance tradition and practicality. Online spending dominance (+7.9% YoY), influencer-driven trends, and a surge in gift card and wellness spending reveal a more strategic, values-based approach to celebration. As Mastercard’s economists conclude, even amid tariffs, inflation, and tighter budgets, shoppers are rewriting the rulebook—finding meaning, flexibility, and joy in a season where spending smartly is the new luxury.
