Holiday spending in 2024 soared past expectations, marking a significant show of consumer strength that underscored the resilience of the U.S. economy despite persistently high interest rates. Data released by Mastercard SpendingPulse on Thursday revealed that retail sales from Nov. 1 to Dec. 24 rose 3.8% compared to the same period last year, exceeding initial projections of 3.2%.
Strong retail performance during key season
The robust holiday sales marked a step up from last year’s 3.1% growth, providing a positive signal for an economy heavily reliant on consumer spending. The figures, which exclude automotive purchases, reflected both in-store and online activity. Michelle Meyer, chief economist at the Mastercard Economics Institute, emphasized the significance of the results, saying, “Solid spending during this holiday season underscores the strength we observed from the consumer all year.”
Jewelry emerged as the standout category, with sales increasing 4% compared to last year. Apparel and electronics also saw notable gains. Online shopping drove much of the growth, with e-commerce sales up 6.7% year-over-year, highlighting consumers’ preference for convenience and digital platforms.
Value-driven shopping amid high rates
While consumers showed a willingness to spend, the data also indicated a sharp focus on value and discounts. Meyer noted that promotional events like Cyber Monday and Black Friday played a pivotal role in driving e-commerce sales, reflecting a consumer base intent on maximizing savings during their holiday purchases.
“The holiday shopping season revealed a consumer who is willing and able to spend but driven by a search for value,” Meyer added.
Broader economic implications
The holiday shopping surge comes against the backdrop of a robust U.S. economy that has weathered the strain of high borrowing costs. The GDP grew at an annualized rate of 2.8% during the third quarter, and the labor market remained resilient, with unemployment at a historically low 4.2%. Consumer spending, which accounts for nearly 75% of the nation’s economic activity, has been a key driver of this stability.
The Federal Reserve’s recent interest rate cuts—a total of one percentage point over the final months of 2024—provided some relief for borrowers. However, economists suggest the rate reductions likely had little direct impact on holiday spending due to the lag in their economic effects. Interest rates remain elevated, at a range of 4.25% to 4.5%, after years of aggressive hikes aimed at curbing inflation.
Outlook for 2025
Despite the strong spending figures, Federal Reserve Chair Jerome Powell signaled earlier this month that rate cuts in 2025 may be limited as policymakers remain cautious about inflation. Powell acknowledged the economy’s strength, attributing much of its resilience to consumer spending.
“We think the economy is in a really good place,” Powell said during a recent press conference, adding, “Growth of consumer spending has remained resilient.”
The surge in holiday sales reflects both the enduring strength of U.S. consumers and their adaptability to economic challenges, painting an optimistic picture for the months ahead.
