- KeyBanc’s early-January 2026 survey found 43% of consumers spent more in the 2025 holiday season, up from 24% in 2024.
- Respondents expect to increase near-term spending across staples and discretionary categories such as groceries, travel, dining and home décor.
- New OBBBA tax changes are projected to lift refunds and reduce withholdings, potentially adding $100–135B (about $1,000 per household) to consumer liquidity and boosting early-2026 retail sales.
- Spending strength skews toward middle- and higher-income households, while lower-income consumers remain constrained and outcomes hinge on refund timing and macro headwinds.
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KeyBanc’s survey unveiled a sharp recovery in consumer sentiment and spending during the 2025 holiday season. With 1,056 respondents surveyed in early January 2026, 43% said they spent more than in the holiday period a year prior—up from just 24% in 2024—marking a return to 2023 levels. Respondents plan increased upcoming-quarter spending in various categories (grocery, travel/leisure, autos, clothing, beauty, dining and home décor), suggesting momentum extending into early 2026.
A major underpinning of the expected uplift in spending is the suite of tax reforms embedded in the OBBBA, which take effect for the 2025 tax year. Key features include raised SALT deduction caps, deductions for tips (up to $25,000) and overtime pay, among others. Analysts estimate that tax refunds and decreased withholdings could boost household liquidity significantly—potentially averaging an extra $1,000 per household and cumulatively adding $100-135 billion into consumer wallets.
Looking at equities, Patrick Industries (PATK) emerges as a case study both for upside and risk. The shares are up roughly 38% over the past year. Benchmark has raised its price target to $140 (from $115), while KeyBanc lifted its Overweight target to $135. However, other valuation indicators such as P/E (20.5x for 2024) and Cash Flow-based fair value suggest potential overvaluation.
Strategic implications for investors and companies include:
- Retailers focusing on categories likely to benefit (restaurants, home décor, clothing, travel) may outperform, particularly if they serve middle- and upper-income customers.
- Companies with strong free cash flow and balance-sheet strength will better weather any volatility as lower-income consumers remain under pressure.
- Dependency on policy support underscores tax legislation execution and timing as key risk factors; delays or eligible exclusions could materialize downside.
- Valuation discipline is critical: even beneficiaries of the spending rebound, like PATK, may run into downside risk if markets reprice expectations or macro risks increase.
Open questions and risk factors include: how fast tax refunds are disbursed and utilized versus saved or used to pay down debt; whether inflation and wage growth dynamics will erode real gains; and how consumers of lower income—not well served by the new tax breaks—will behave in discretionary categories.
Supporting Notes
- The KeyBanc survey, conducted January 7–8, 2026 with 1,056 U.S. consumers, found 43% said they spent more during the 2025 holiday season versus the prior year; in 2024, that number was only 24%.
- Projections under the tax law (OBBBA) expect increased tax refunds averaging ~$1,000 per household in 2026 and an additional $100–135 billion flowing into the economy through refunds and smaller tax liabilities.
- The OBBBA includes several new deductions: for SALT (State and Local Tax) payments (new cap of $40,000), for tip income (up to $25,000), and for overtime earnings, with eligibility phased out at higher income levels.
- Patrick Industries has seen strong performance: ~37.9% share price return over the past year, and analysts from Benchmark and KeyBanc have recently raised price targets for the company (Benchmark to $140; KeyBanc to $135), maintaining Buy/Overweight ratings.
- Valuation concerns: for the fourth quarter of 2024, PATK reported $18 million in adjusted net income (EPS $0.52), full-year net income of $138 million (EPS down 5% YoY), and a P/E ratio of ~20.5x; some analysts view the stock as overvalued at current levels.
- Bank of America data show card spending up 1.8% YoY in December (household credit + debit cards), with higher income households (+2.4%) contributing disproportionately relative to lower income (+0.4%) households—reinforcing the K-shaped recovery dynamic.