Christmas Discounts Mask a Stickier Inflation Problem

December brings visible relief at the register. Retailers lean heavily into holiday promotions, pushing down prices on discretionary goods and creating the impression that inflation is steadily fading.

But the underlying picture remains more complicated. While goods prices soften under seasonal discounting, services inflation continues to run hot — especially in labor-intensive categories. The contrast is sharpest during the holidays, when short-term price cuts mask longer-term cost pressures that households and policymakers still face.

This seasonal divergence highlights a growing gap between what consumers see and what inflation data signal beneath the surface.

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Holiday discounts are cyclical. Services inflation is structural. That distinction matters for markets because goods prices respond quickly to competition and inventory dynamics, while service prices move with wages, regulation, and productivity — all of which adjust slowly.

For investors, this keeps the inflation conversation focused on labor momentum rather than retail pricing. Equity markets may welcome softer headline CPI prints, but bond markets and policymakers remain anchored to services trends that suggest inflation persistence.

For the Federal Reserve, seasonal goods deflation offers limited comfort. Policymakers continue to frame progress toward the 2% target through services inflation and wage growth. As long as labor income grows above productivity, service providers retain pricing power — even when consumers see discounts elsewhere.

For households, the disconnect explains mixed sentiment. Shoppers benefit from promotions on gifts and apparel, yet monthly expenses tied to rent, insurance, healthcare, and childcare continue to rise. The result is selective relief rather than broad financial easing.

Christmas discounts soften the optics of inflation, not its foundation. Until services prices and wage growth slow decisively, seasonal relief will remain just that — temporary.

— Lauren Brown
Editor, American Ledger

Sources

Bureau of Labor Statistics, November 2025, https://www.bls.gov/cpi/
Bureau of Labor Statistics, November 2025, https://www.bls.gov/ces/
Bureau of Labor Statistics (JOLTS), October 2025, https://www.bls.gov/jlt/
Federal Reserve, November 2025, https://www.federalreserve.gov/monetarypolicy.htm
University of Michigan, December 2025, https://data.sca.isr.umich.edu/