December 01, 2025 – As the holiday season unfolds, U.S. economic indicators reveal a landscape shaped by shifting consumer behavior, inflationary pressures, and global market dynamics. Black Friday sales saw modest growth, driven by robust online shopping and the influence of AI-powered retail tools, even as inflation tempered real spending and economic disparities widened. Retail momentum, however, appears to be slowing, with September’s growth subdued and consumer spending expected to soften further amid lingering effects from the recent government shutdown. Mortgage rates, after a brief decline at the end of last month, spiked on the first day of December following a Japan rate hike signal, adding volatility to the financial outlook. Meanwhile, consumer confidence has tumbled to its lowest level since April, reflecting heightened concerns about personal finances and the broader economy.

Black Friday sales boost by inflation and K-shaped economy: The busiest shopping day climbed modestly this year compared to last year, with Black Friday sales up 4.1% year-over-year, according to Mastercard Spending Pulse. While sales at brick-and-mortar stores were somewhat muted with a growth of 1.7% from last year, online shopping demand remained robust with e-commerce sales jumping 10.4% from 2024. Artificial Intelligence (AI) power shopping tools may have played a role as data from Adobe Analytics indicates that AI-driven traffic to U.S. retail sites surged 805% from last year. With inflation at 3%, real spending was smaller as sales gains did not account for higher prices. The bifurcation in the economy also has contributed to the increase in holiday spending this year. Despite the low- and middle-income households tightening their budgets this holiday season, higher earners have been able to spend more willingly because of their stock gains and higher home valuations. Americans will continue to shop on Cyber Monday, with online sales projected to increase 6.3% year-over-year. Retail sales for November and December are projected to grow 3.7% to 4.2% compared to a year ago, according to the National Retail Federation.

Retail sales inch up in September and may slow in the next two months: In addition to the Black Friday sales reports, the September retail sales data was also released last week after a nearly six-week delay due to the government shutdown. Sales at U.S. retailers and restaurants continued to rise month-over-month at 0.2% in September, but the pace of growth was much softer than the 0.6% increase observed in both July and August. The mild jump in the headline number in September suggests a pullback in consumer spending as Americans struggle to stay above water amid higher prices and a waning job market. While sales rose 0.7% in September at restaurants and bars, clothing, electronics, and sporting goods stores all experienced declines at the end of Q3 2025. With consumer spending likely to take a hit in October and November due to the government shutdown, retail sales activity will slow further in the next couple of months before bouncing back in December. The loss in momentum in consumer demand, however, might have given the Fed another reason to cut rate next week.    

Mortgage rates jump after Japan hints at raising rates: Mortgage rates had been trending downward in the last two weeks, reaching a 4-week low before Thanksgiving, due to weaker-than-expected retail sales and cooler-than expected inflation. The Monday morning announcement about Japan’s consideration of a rate hike, however, triggered a sell-off in global bonds and pushed the 10-year treasury yields higher by about 7 basis points (bps) by the end of the day. Correspondingly, the average 30-year fixed rate also rose 9 bps before the day closed. The sell-off took place mostly in the morning though and the momentum was flat in the last four hours of trading. If the Bank of Japan is committed to ending their ultra-loose policy by raising interest rates, volatility could remain in the global market and long-term rates could be adversely impacted in the near term.

Consumer confidence tumbles to lowest level since April: Americans had a sharp decline in their confidence in November after staying relatively flat for several months, likely due to the federal government shutdown that lasted for six weeks. The latest report from the Conference Board indicates that the U.S. consumer confidence index dropped 6.8 points last month to 88.7 from 95.5 (revised) in October. Consumers’ current assessment of and their short-term expectations on business and labor market conditions both fell in November, suggesting that concerns about their financial well-being and the status of the economy have worsened. While mentions of the labor market have eased somewhat in the consumers’ write-in responses in the latest survey, their views of their current and future financial situations have deteriorated. In fact, assessments of current financial situations dropped close to the low levels observed in August 2024. The six-week government shutdown was one factor that contributed to the decline in consumer confidence. While layoffs, furloughs, and drop-offs in household income resulting from the closure of the government may have had an adverse impact on consumer confidence last month, it will likely bounce back in December with the reopening of the government.

FHFA increases conforming loan limits for 2026: The Federal Housing Financing Agency (FHFA) raised the conforming loan limits for mortgages Fannie Mae and Freddie Mac will acquire in 2026. To keep up with higher home prices, the baseline ceiling for one-unit properties will increase 3.26% from $806,500 in 2025 to $832,750 in 2026. For high-cost states like California and New York, higher loan limits will also be adjusted with the new maximum being raised to $1,249,125 next year from $1,209,750 this year. The conforming loan limits of 17 of the 58 counties in California will be above the national baseline, including eight counties in the Bay Area and four counties in Southern California. The increase in the limits next year will help some California homebuyers who are being stretched thin by the state’s housing affordability pressure, especially since home prices are projected to climb further in the upcoming year, while mortgage rates are only expected to see mild declines in 2026.

Note: This summary report gets updated every Monday by 6:00 pm PST. Feel free to email us at [email protected] if you have any questions and/or feedback.