Recent Searches
How EY-Parthenon can help
As consumer demands evolve, consumer products and retail companies must find the right balance between success today and growth tomorrow.
Read moreThe 2026 holiday season should deliver the strongest sales growth in five years, with higher purchasing volumes accounting for most of the gain. Healthy household balance sheets, accumulated wealth and low unemployment continue to support spending despite depressed consumer sentiment. Still, slower real income growth and persistent inflation pressures will constrain spending capacity for many households. Retailers will need to tailor pricing, promotions and inventory to an uneven consumer landscape while managing continued pressure on margins.
The EY-Parthenon team forecasts a 5.2% rise in nominal US retail sales for the November–December 2026 holiday season, the strongest gain since 2021. Sales, excluding autos, gas and restaurant services, are expected to reach $1.08 trillion, up from $1.03 trillion in 2025. Real sales growth is anticipated to be around 2.9%, with prices rising 2.3%.
The forecast represents an acceleration from the 3.5% increase in holiday sales in 2025 and the 4.2% gain in 2024. Consumers entered the fall with solid spending momentum, as nominal consumer spending rose 6.1% year over year (y/y) in August and inflation-adjusted spending increased 2.6%, supported by broad-based gains across both goods and services, including clothing, food and recreational goods.
The disconnect between consumer sentiment near historical lows and sustained spending strength reflects households’ frustration with affordability alongside their continued capacity to spend. Household balance sheets remain broadly healthy, with low leverage and substantial wealth gains from home price appreciation and rising equity markets. With unemployment around 4%, a broadly healthy labor market also continues to support income and spending. These supports have allowed consumption to advance even as households remain deeply dissatisfied with the cost of living.
Annual revisions to household income and savings suggest consumers have a somewhat larger financial cushion than previously believed, with the saving rate standing at 4.1% in August. But the income squeeze remains evident. Cumulative inflation, higher prices at the pump and moderating wage growth are eroding purchasing power. Real disposable income growth has slowed from 2.0% y/y at the start of 2026 to 1.3% in August, half the pace of spending growth. Households continue to spend, increasingly by drawing on savings, wealth and credit to compensate for slower income growth.
“Consumers are entering the holiday season with solid spending momentum, even as they remain frustrated by high prices,” says Gregory Daco, EY-Parthenon Chief Economist. “Healthy household balance sheets, wealth gains and low unemployment continue to support purchases. But those supports are unevenly distributed, and spending cannot indefinitely outpace income growth. Many families will face difficult budget choices even as aggregate holiday sales remain strong.”
Higher-income households benefit from substantial financial and real estate wealth, giving them greater capacity to sustain spending. Many middle- and lower-income households remain more dependent on current income and more exposed to rising living costs. Delinquencies do not point to broad household financial distress, but pockets of pressure in auto loans and credit cards highlight the strain on younger, less affluent families. These differences will continue to shape holiday purchases as households weigh discretionary spending against the cost of essentials.
Inflation will add to those pressures. Headline personal consumption expenditures (PCE) inflation stood at 3.4% y/y in August, and record diesel prices, rising electronics and software prices, and ongoing supply-chain pressures threaten to further erode purchasing power heading into the holidays. For retailers, higher transportation and sourcing costs will compound the challenge of serving price-sensitive customers while protecting margins.
“Consumers remain willing to spend, but elevated prices continue to influence what they buy and when,” says Will Auchincloss, EY-Parthenon Americas Retail Sector Leader. “We expect households to compare offers carefully and time purchases around promotions. Retailers will need to tailor assortments and discounts to their customers’ budgets while managing inventory closely to avoid excessive markdowns.”
Online sales are projected to rise 10.5%, roughly twice the pace of overall holiday retail sales growth. Convenience and the ability to compare prices should support further gains, with affluent consumers placing greater emphasis on service and delivery options and budget-conscious shoppers seeking discounts. Accurate inventory information and reliable fulfillment will be particularly important during peak shopping periods.
Note: The EY-Parthenon holiday sales forecast aligns with the National Retail Federation’s definition, excluding auto dealers, gas stations and restaurants for the November-December period.
The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
