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The resilient U.S. consumer came through for retailers again in December, when sales growth topped 4% and most categories gained.
It was the best rate of December growth since 2022, in line with the long-run average, according to GlobalData research. Even core retail volumes for the month rose by 1.4%, which GlobalData Managing Director Neil Saunders called “certainly respectable” if not spectacular.
The month capped off what is arguably a better-than-expected 2025 for retailers, who scrambled all year to obtain merchandise and protect margins amid fluctuating tariffs and an uncertain economy.
“While there are economic pressures on the consumer, most shoppers were determined to have a good festive season, and many opened their wallets to do so,” Saunders said in emailed comments regarding the government’s retail sales numbers for December.
What the month’s result means for 2026, though, requires a closer look, he and others said.
Tariffs continue to sting
Newly added import duties last year sent consumers scrambling to obtain goods, including holiday merchandise, before prices rose. This meant that a good chunk of holiday shopping took place before December.
“A longer holiday retail season, which used to result in consumers buying more, backfired this year: people bought earlier and wrapped up their holiday spend earlier,” Katie Thomas, who leads the Kearney Consumer Institute, said in emailed comments.
Chip West, retail and consumer behavior expert at marketing firm RRD, agrees. Cyber Monday, which took place in December last year, helped drive up e-commerce numbers but “did not appear to help push sales growth for the month as a whole.”
“A December surge many had predicted failed to materialize as consumers may have grown more concerned over potential tariffs, rising costs and fluctuating economic data,” he said in emailed comments.
As import duties added last year hit their anniversary mark, their effects on prices should normalize, but that doesn’t apply to more recent tariffs, according to West.
“We now see consumer sentiment rising, driven by stock market gains, cooling inflation expectations, and the anticipation of larger tax refunds,” he said. “However, new tariff costs on imported goods are projected to be passed on to consumers by spring, fortifying the need for retailers to sustain their efforts to promote value in order to capture anticipated spending.”
Higher prices are creating winners and losers
Some retail segments fared well in December, especially apparel, which rose over 5%, and hobby and bookstores, which rose nearly 9%. But that came at others’ expense.
Shoppers passed on more expensive items like furniture (which dropped nearly 4%) and less necessary items so they could attend to their holiday lists, according to several analysts.
“Consumers were also deprioritizing spending on big-ticket items to free budget for gifts and other holiday sundries that were important in the moment,” Saunders said. “We also saw some softness in seasonal decor, with more consumers trying to re-use decorations and accents from prior years rather than buy new.”
Luxury consumers can’t always be counted on
Much is made of the “K-shaped economy,” where lower-income households struggle to absorb the consequences of tariffs, higher grocery prices and an uncertain employment picture, while higher-income households don’t feel the pinch.
“The rich are getting richer and the poor are getting poorer,” Bankrate Principal Analyst Ted Rossman said in emailed comments. “While there are some expected tailwinds in 2026, such as lower taxes, I believe that consumer spending has gotten off to a slow start this year.”
In fact, consumer sentiment in January sank to its lowest point in more than a decade, according to the Conference Board. This adds up to what Heather Long, chief economist at Navy Federal Credit Union, calls a “Costco economy,” which favors discount retailers.
But retailers shouldn’t oversimplify the K-shape analysis because luxury consumers are also wary, according to the Kearney Consumer Institute’s Thomas.
“There’s an assumption that just because the stock market is performing well, everyone is going to continue to spend,” she said, noting her recent research showing that consumers at all income levels are being thoughtful about their consumption.
“Income may put a certain consumer segment at the top of the K, but many of these people are overleveraged and overspending,” she said. “Consumers are second guessing. For example, in the luxury market, there’s been a pullback from traditional leather goods from luxury houses because of how much prices have gone up in recent years, whereas jewelry has outperformed because prices have been a lot more stable.”
With December’s sales stats out, retail has the full picture of 2025, and that includes the fact that volumes were below average, per GlobalData research.
That sets the scene for this year.
“The outlook for 2026 is very mixed and we see many of the trends, such as low volumes, carrying over into the new year,” Saunders said. “The environment will remain one in which battling for market share remains critical.”