K-shaped economy and inflation boost Black Friday sales by 4.1% from last year, online spending jumps 9.1%

By Nathaniel Meyersohn, Auzinea Bacon, CNN

(CNN) — US retail sales on Black Friday, the busiest shopping day of the year, climbed 4.1% compared with last year, according to data released Saturday by Mastercard SpendingPulse. Online shoppers alone spent $11.8 billion, up 9.1% from 2024, according to data collection platform Adobe Analytics.

But those gains don’t account for higher prices due to inflation, so actual spending could be flat.

“We have 3% inflation, so maybe (the 4.1% increase in spending) is a real increase of just 1% or so, which is not that much of an increase,” Rick Newman, who writes The Pinpoint Press, a newsletter on the US economy, told CNN on Friday.

There’s also a bifurcation in who’s spending. The Federal Reserve’s most recent Beige Book, a collection of anecdotes about the economy, showed consumer spending among low- and middle-income consumers is on the decline. Meanwhile, the Fed found high-end consumers are continuing to spend — including on luxury items and travel.

Consumers have bought fewer items this holiday season, but the average selling prices are higher, according to Claudia Lombana, a national consumer expert.

“The ones that have higher income are spending at will, but those who are less affluent are budgeting,” Lombana told CNN’s Omar Jimenez on Saturday.

It’s part of the so-called K-shaped economy, in which higher earners get a boost from their stock market investments and home valuations and use their fatter paychecks to spend. But lower earners increasingly live paycheck to paycheck and look for discounts — or curtail their spending to cope with rising prices.

“The story of the economy right now is it’s a bifurcated economy. If you’re lucky enough to own stocks and own a home, you’re part of the upper slant of that cave, that K-shaped economy … you’re going to be comfortable spending a fair amount of money this year,” Newman said.

But Newman added that people on the lower slant of the K — those who don’t own stocks or a home — are increasingly worried about job security.

“I think those people are going to be pinching pennies this holiday season,” he said, adding that they will be more frugal with gift purchases and necessities. Heating bills, for instance, are higher because of natural gas prices going up. And grocery prices are on the rise, while rent hikes outpace income growth, he noted.

Eighty-five percent of consumers expect higher prices because of President Donald Trump’s tariffs, according to the National Retail Federation, or NRF. And it’s a factor in how they shop.

“Nobody is sort of going on an item-by-item basis and saying, ‘Oh, the Trump tariffs have pushed up costs here by 4% or 10%,’ but it’s on people’s minds,” Newman said.

Value is more important than ever these days for consumers. Consumer sentiment is glum, job growth has slowed, and the federal government shutdown forced low-income shoppers to pull back spending amid a pause in Supplemental Nutrition Assistance Program funding.

As goods and services become harder for everyday Americans to afford, shoppers have grown pickier about how they spend their money and hunt for deals. They are gravitating toward retailers they feel can help them stretch their dollars further on groceries, household essentials, clothing and electronics.

Chains such as Walmart, TJ Maxx, Gap and others are benefiting, reporting strong sales during their latest quarters. Walmart is now gaining market share against competitors across all income groups and in several merchandise categories.

But others, such as Target and Bath & Body Works, are struggling.

And people are splurging less on gifts for themselves, according to Bath & Body Works.

Shoppers are expected to continue to splash out this holiday season, despite the cost-of-living squeeze and other economic pressures. The NRF expects retail sales in November and December to grow 3.7% to 4.2% compared with a year ago. That growth would be similar to last year’s rise.

More on the numbers

The NRF projects a record $1 trillion in holiday spending this year, up from $976 billion last year.

Spending growth on apparel grew 6.1% online and 5.4% in-store on Black Friday, with Mastercard suggesting that “shoppers refreshed wardrobes while leaning into value-driven choices and convenience.” Consumers spent a record $6.4 billion online on Thanksgiving, up 5.3% from a year ago, according to Adobe Analytics, as big deals drew them to shop online.

“The magnitude of discounts was the big story on Thanksgiving yesterday, as retailers leaned into delivering great deals to drive consumer demand online,” Vivek Pandya, lead analyst at Adobe, said in a statement Friday.

Meanwhile, “buy now, pay later” continues to be an important payment option for consumers this holiday season. Adobe forecasts $20.2 billion will be spent through the payment method from November 1 to December 31, an 11% uptick over 2024.

“We saw half the people in America already shopping by Halloween this year for the holiday period,” said Lombana. “Of course, this five-day period from Thanksgiving Day through Cyber Monday is significant for retailers, both online and in store. We are expecting to see Cyber Monday deliver strong.”

She noted that “consumers are definitely being more cautious, but during the holidays, they also want to engage in the holiday spirit.”

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