According to most forecasts, the 2025 holiday shopping season is shaping up to be neither great nor terrible, but somewhere in between.
In a Nov. 6 report, the National Retail Federation (NRF) predicted that U.S. retail sales in the last two months of the year would grow between 3.7% and 4.2% from the prior year and pass the $1 trillion mark for the first time, boosted in part by higher consumer prices.
However, an earlier NRF survey released in October projected that spending during the entire holiday season would dip slightly from 2024 to $890.49 per person on average. That figure includes holiday gifts, food, decorations and other seasonal items. Meanwhile, Deloitte predicted that holiday shoppers would spend 10% less in 2025 than they did in 2024.
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Nobody predicts that holiday spending will drop 50% — or even anywhere close to that. But what would happen if the economy did experience such a massive decline? GOBankingRates asked ChatGPT, and here’s what it had to say.
Also see the four worst holiday shopping habits of each generation.
‘Major Economic Shock’
The first thing you need to know about a 50% drop in holiday spending is that it would be unprecedented, at least since modern records have been kept.
According to NRF data, only once in the last 20 years has there even been a year-over-year decline in holiday sales. That happened during the Great Recession of 2008, when spending fell by 4.5%.
If holiday spending were to crater by 50%, it would lead to a “major economic shock,” according to ChatGPT. But because retail makes up only 5% to 6% of U.S. GDP, a 50% drop in holiday spending “wouldn’t plunge the U.S. into a Great Recession by itself,” ChatGPT noted. Instead, it would “create a visible, painful drag on growth, especially in consumer-facing industries.”
It’s difficult to pinpoint the exact economic impact because a 50% drop in holiday spending has never happened, so there’s no comparable data. However, ChatGPT outlined several different scenarios on what might happen if holiday spending fell by half.
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Immediate GDP Slowdown
A 50% drop would likely shave 0.5 to 1 percentage points off quarterly GDP growth, per ChatGPT. But that’s not the only impact on GDP it could have.
It could also potentially pull the holiday quarter (fourth quarter) near zero growth or slightly negative.
Major Retail and E-Commerce Contraction
A 50% drop would also have major impacts on retail and e-commerce. For one, ChatGPT pointed to large revenue declines for many retailers (20% to 30% full-year impact).
Additionally, consumers could see increased store closures and bankruptcies, especially among department stores, apparel brands, toy retailers and small independent shops.
E-commerce giants (Amazon, Walmart.com, Target.com, etc.) would also likely take a hit, though they’d “manage better than small retailers,” per ChatGPT.
Job Losses (Especially Low-Wage Jobs)
Because the holiday season employs hundreds of thousands of seasonal workers, a 50% spending drop would also impact the job market.
Per ChatGPT, it could cause the elimination of 300,000 to 600,000 seasonal retail jobs, as well as job losses for warehouse workers, delivery drivers and mall staff.
There could also be permanent first-quarter layoffs as retailers “right-size” their payrolls after the holiday season.
Ripple Effect on Other Economic Sectors
In addition to the direct impact on retail sales, a 50% drop in holiday spending would also negatively impact the following sectors.
- Logistics and manufacturing: Less retail demand means reduced manufacturing orders, lower import volumes, slower shipping activity and “idle inventory sitting in warehouses.” Industries most affected could include packaging, freight transportation, ports, and manufacturers of toys, electronics and apparel.
- Financial markets: Many retail stocks could see drops anywhere from 10% to 25%, while the broader stock indexes could dip 2% to 5% in anticipation of weaker consumer demand.
- Government: A decline in sales tax revenue would likely create significant shortfalls in most state and local governments. This, in turn, could lead to tighter budgets, delayed projects, cuts to services and hiring freezes.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT What Would Happen to the Economy If Holiday Spending Dropped by 50%
