(NEW YORK) — Consumer spending grew solidly this holiday season, rebuking concerns of a slowdown and reinforcing positive signals about the U.S. economy as it approaches the end of a tumultuous year.

Buying among shoppers rose 3.1% over the holidays compared to the same period last year, according to data released on Tuesday by Mastercard SpendingPulse, which measures in-store and online purchases from Nov. 1 to Dec. 24 across all forms of payment. The data is not adjusted for inflation.

Robust spending during the holidays appears to have dispelled concern among some economists of a decline. Their fears centered on a drop-off in pandemic-era savings and a rise in borrowing rates for consumer loans such as credit cards.

But a significant reduction of inflation over the past year has delivered some relief for consumers. Strong hiring and resilient wage growth have bolstered shoppers, who account for nearly three-quarters of U.S. economic activity.

“This holiday season, the consumer showed up, spending in a deliberate manner,” Michelle Meyer, chief economist at the Mastercard Economics Institute, said in a statement.

“The economic backdrop remains favorable with healthy job creation and easing inflation pressures, empowering consumers to seek the goods and experiences they value most,” Meyer added.

Spending over the holidays surged fastest at restaurants, where buying amounted to 7.8% growth compared to the same period last year, Mastercard SpendingPulse data showed. The expansion of spending also grew markedly in apparel, which saw a 2.4% rise.

Purchases of electronics and jewelry, however, shrunk compared to the same stretch of 2022, the data showed.

Retail sales grew at a breakneck pace online, surging more than 6%. By contrast, the data showed, in-store purchases grew at a sluggish pace of 2%. The majority of purchases took place in person, resulting in the 3.1% overall growth rate, Mastercard SpendingPulse said.

The rush of holiday shopping aligns with a burst of optimism among observers following robust sales on Black Friday.

Consumers spent a record $9.8 billion online on Black Friday, which marked a 7.5% increase over the year prior, according to Adobe Analytics.

Shopper visits, a metric used to assess in-person sales, rose 4.6% compared on Black Friday compared to a year ago — a rate that nearly doubled the average overall increase in foot traffic this year up to that point, retail data firm Sensormatic Solutions said.

A host of key economic indicators marked a good omen for consumers as they entered the holiday season. The unemployment rate stood near a 50-year low, wage growth outpaced inflation and savings remained resilient for upper- and middle-income households.

The U.S. economy grew at an annualized pace of 4.9% over three months ending in September, more than doubling growth in the previous quarter, a government report in October showed.

Still, some warning signs threw the fate of the holiday retail season into doubt.

Credit card debt climbed to a record high in the third quarter of 2023, surging nearly 5% from the previous quarter and leaving a growing share of borrowers late on payments, a Federal Reserve report last month showed.

The growing debt emerged alongside a spike in borrowing costs for loans from credit cards to mortgages that stem from interest rate hikes at the Federal Reserve.

Since last year, the Fed has raised its benchmark interest rate at the fastest pace in more than two decades, seeking to slash price hikes by slowing the economy and reducing consumer demand.

But the central bank may soon reverse its policy of raising rates, according to a forecast released after the Fed’s meeting earlier this month.

Inflation has fallen significantly from a peak of about 9% last summer but remains more than a percentage point higher than the Fed’s target.

Members of a decision-making committee at the Fed expect to reduce rates next year amounting to three quarter-point cuts, the central bank said.

Speaking at a press conference in Washington, D.C., Fed Chair Jerome Powell cautioned that the exact course of interest rates remains unclear.

“Inflation has eased from its highs and this has come without the significant increase in unemployment. That’s very good news,” Powell said.

“But inflation is too high, ongoing progress in bringing it down is not assured, and the path is uncertain,” he added.

Copyright © 2023, ABC Audio. All rights reserved.