Why Christmas 2025 Still Feels Expensive Despite Slower Inflation

Why slower inflation does not mean lower prices

Inflation measures how quickly prices rise, not whether they fall.

When inflation slows, prices continue to increase, albeit at a slower pace than before. For prices to actually drop, inflation would need to turn negative, something that has not occurred in recent years. As a result, many everyday costs remain higher than they were several years ago, even with inflation no longer surging.

During the holidays, that difference becomes more noticeable. Food, gifts, travel, and seasonal expenses hit budgets all at once, magnifying the impact of higher price levels.

Consumers are already signaling financial strain

Recent polling suggests those pressures are shaping behavior ahead of the holidays.

A December survey from the AP-NORC Center for Public Affairs Research found that most adults noticed higher grocery prices compared to last year, while about half said it was harder to afford holiday gifts. Many respondents also reported cutting back on discretionary spending or delaying larger purchases to manage costs.

That sentiment points to caution setting in well before Christmas week.

Grocery prices remain a key concern

Food costs are one of the clearest pressure points heading into Christmas 2025. Although food inflation has slowed, grocery prices remain higher year-over-year. Data from the U.S. Department of Agriculture’s Economic Research Service shows food-at-home prices remain elevated across major categories, including meat, dairy, and other staples. Because holiday food spending is concentrated into a short period, even moderate price increases can have an outsized impact on household budgets.

Travel costs are expected to stay elevated

Holiday travel is also projected to remain costly. A year-end holiday travel forecast from the American Automobile Association indicates that peak seasonal demand is expected to remain strong, continuing to push average airfares and hotel rates higher during the Christmas period. Those trends suggest families planning Christmas travel in 2025 may still face elevated costs even if they book early, particularly around the most popular travel dates. For many travelers, flexibility with departure days and return schedules is expected to come at a premium.

Spending may continue, but unevenly

Early retail data points to an uneven holiday spending season. While overall sales remain resilient, recent reporting shows that higher-income shoppers are driving much of the growth in online holiday spending, as lower-income consumers become more selective and focus on discounts amid ongoing cost pressures. That split helps explain why topline spending forecasts remain solid even as many households scale back discretionary purchases.

What this means heading into the holidays

Christmas 2025 is costly not because inflation is accelerating, but because prices remain elevated even as inflation has slowed. While the pace of increases has eased, the amount families pay for essentials has not come down, making the gap between economic headlines and everyday spending especially visible this season.

With grocery bills still high, holiday travel carrying a premium, and gift prices leaving less room for flexibility, many households are moving through December more cautiously. The result is a holiday shaped less by excess and more by careful choices, as families adjust expectations in a higher-price environment that has become the new normal.

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