What: Americans continue to spend robustly across income levels, favoring both affordable and small luxury purchases, even as consumer sentiment remains historically low.

Why it is important: The resilience in spending, especially among higher-income groups and value-driven shoppers, underscores the adaptability of US retail and the importance of diverse retail formats.

Despite historically low consumer sentiment, US retail spending has remained unexpectedly strong, with Americans across income brackets continuing to open their wallets. Census Bureau data for September shows retail and restaurant sales up 1% year on year after inflation, contradicting widespread reports of consumer caution. Higher-income shoppers, buoyed by a resilient stock market, have fueled growth for luxury brands such as LVMH and premium offerings from Unilever, while value-focused retailers like T.J. Maxx have seen increased business from budget-conscious consumers. Even lower-income Americans have increased their spending, albeit at a slower pace, with Numerator data indicating a 3.8% rise for those earning less than $60,000 and a 4.3% increase for those above $100,000. The “lipstick effect” is evident, as mass-market fragrance sales surged 17% year on year, reflecting a preference for small indulgences during uncertain times. Analysts remain optimistic for the holiday season, forecasting retail sales growth above inflation, though they caution that spending could eventually align with consumer sentiment.

IADS Notes: The current US retail environment is marked by a striking disconnect between consumer sentiment and actual spending, as confirmed by multiple industry sources throughout 2025. In November 2025, the NRF projected that holiday retail sales would surpass $1 trillion for the first time, with growth of up to 4.2% despite persistent inflation and economic headwinds. This resilience is echoed in Visa’s September 2025 analysis, which found that retail sales outperformed expectations with a 3.7% annual increase in June, even as consumer confidence hit a three-year low and inflation expectations rose to 6%. PwC’s September 2025 holiday outlook highlights a 5% decline in overall holiday spending, driven by Gen Z’s sharp cutbacks, while older generations maintain or increase their budgets, reinforcing the importance of value-driven and flexible retail models. The NRF’s July 2025 Top 100 Retailers list further illustrates the divergence in performance, with off-price retailers like TJX thriving and traditional department stores struggling. Visa’s March 2025 report underscores that, despite widespread economic anxiety, positive income expectations are sustaining cautious but ongoing consumer spending. Collectively, these findings demonstrate that while Americans express economic gloom, their spending patterns remain robust, shaped by generational divides, value-seeking behavior, and the enduring appeal of both affordable and small luxury purchases.

American consumers are miserable. But they keep spending