Visa's research arm expects US holiday retail sales to grow 4.5% year-on-year during the final two months of 2026, marking the fastest pace since 2021. The forecast, released by Visa Business and Economics Insights, suggests that consumers remain willing to spend even as inflation continues to influence what they buy.
According to Michael Brown, Visa's principal US economist, the outlook is supported by "solid income growth and household wealth," though he acknowledged that "higher prices remain part of the picture." The firm also projects the average shopper will spend $777 on holiday gifts this year, up 5.6% from $736 in 2025, indicating that budgets are expanding rather than shrinking.
What's driving the spending?
The projected increase comes against a backdrop of persistent inflation, which has reshaped consumer behavior in recent years. Shoppers are increasingly prioritizing essentials and seeking value, but the data suggests they are still willing to open their wallets for gifts and seasonal purchases.
Visa's forecast aligns with broader trends in retail spending, which have shown resilience despite higher borrowing costs and elevated prices. The firm's analysis points to a consumer base that is financially stable enough to absorb price increases, even if it means adjusting what they buy.
For context, holiday sales are a critical period for retailers, often accounting for a significant share of annual revenue. A 4.5% increase would represent a healthy boost, though it would still trail the pandemic-era surge of 2021, when stimulus checks and pent-up demand drove a record spending spree.
What it means for investors
For everyday investors, this forecast offers a window into the health of the consumer sector, which is a major driver of the US economy. Strong holiday spending can support retailers, payment processors, and logistics companies, potentially boosting their earnings and stock prices.
However, the report also highlights the ongoing impact of inflation. While consumers are spending more, part of that increase reflects higher prices rather than greater volume. Investors should watch whether retailers can maintain profit margins as they compete for shoppers' dollars, especially if discounting becomes more aggressive.
The forecast also carries implications for broader economic policy. If consumer spending remains robust, it could give the Federal Reserve less reason to cut interest rates, as a resilient economy may not need additional stimulus. This dynamic is similar to what other central banks are grappling with, as seen in recent decisions by the Bank of England and Norges Bank, both of which have kept rates elevated to combat sticky inflation.
Investors should also consider the potential ripple effects on sectors like retail and payments. Companies such as Visa itself, along with major retailers, could benefit from increased transaction volumes. Yet, the same inflationary pressures that are boosting nominal sales could also squeeze household budgets, leading to shifts in spending patterns that may not favor every business.
For those with exposure to consumer discretionary stocks, the forecast is a positive sign, but it's worth remembering that past performance is not a guarantee of future results. The holiday season is still months away, and unforeseen economic shocks could alter the picture.
Looking ahead
Visa's projection is one of the first major holiday forecasts for 2026, and it will likely be followed by more detailed analyses from other research firms and industry groups. Investors will be watching for signs of whether the spending momentum holds, particularly as the holiday season approaches.
Key indicators to monitor include monthly retail sales data, consumer confidence surveys, and inflation reports. Any significant deviation from the expected trend could prompt market reactions, especially in retail and payment stocks.
In the meantime, the forecast offers a measure of reassurance that the American consumer remains a pillar of economic growth, even as the landscape evolves. For investors, staying informed about these trends can help in making more grounded decisions, but it's always wise to consider a diversified approach rather than betting on a single forecast.
