Billboard Women in Music 2025
Consumer spending is not unraveling but the spectre of tariffs and persisting inflation is dragging down consumer and business confidence.
That was the message emanating Wednesday from a National Retail Federation online presentation on the state of retail and the consumer, when the trade organization forecast that retail sales in 2025 will grow between 2.7 percent and 3.7 percent over 2024, reaching somewhere between $5.42 trillion and $5.48 trillion. The presentation was held before U.S. President Donald Trump unveiled his global tariff plans later that day.
“Overall, the economy has shown continued momentum so far in 2025 — bolstered by low unemployment and real wage gains — however, significant policy uncertainty is weighing on consumer and business confidence,” NRF president and chief executive officer Matthew Shay said in a statement. “Still, serving customers will remain retailers’ top priority no matter what the economic environment.”
The 2025 sales forecast compares with 3.6 percent annual sales growth to $5.29 trillion in 2024. This year’s forecast is also in line with the 10-year pre-pandemic average annual sales growth of 3.6 percent.
Non-store and online sales, which are included in the total figure, are expected to grow between 7 and 9 percent, year-over-year to a total of between $1.57 trillion and $1.6 trillion. By comparison, non-store and online sales grew 8.1 percent to a total of $1.47 trillion last year.
NRF expects GDP growth to decline just below 2 percent in 2025, down from 2.8 percent in 2024 and below the trend of the past few years.
“Any way you look at it, a lot is riding on the consumer,” NRF chief economist Jack Kleinhenz, said in a statement. “While we do expect slower growth, consumer fundamentals remain intact, supported by low unemployment, slower but steady income growth, and solid household finances. Consumer spending is not unraveling.”
Kleinhenz added that even though consumer confidence is declining, due largely to lingering inflation and consumers’ anxiety over tariffs, that doesn’t mean there will be an immediate drop in consumer spending.
“It’s the hard data on employment, income and tariff-induced inflation — not consumer sentiment — that supports our view of a slower trajectory for consumer spending,” he said.
With the implementation of tariffs, NRF expects personal consumer expenditure inflation during 2025 to remain at the current level of about 2.5 percent. The NRF also indicated that “household balance sheets appear to be in good shape. Delinquencies on auto loans and credit card payments have risen but remain in line with the pre-pandemic trend. The consumer credit picture should remain healthy as long as the labor market remains solid.”
NRF’s retail figures exclude automobile dealers, gasoline stations and restaurants. The 2025 retail sales forecast is based on economic modeling that considers employment, wages, disposable income, consumer credit and previous retail sales, as well as U.S. government sources and the CNBC/NRF Retail Monitor, which is powered by Affinity Solutions.
The forecast came during NRF’s fifth annual “State of Retail & Consumer” virtual event, where Katherine Cullen, NRF’s vice president of industry and consumer insights, said, “Most households have burned through their pandemic savings, without that extra cushion of savings, consumers are more vulnerable to economic shock.” Consumers, she said, received $10 trillion in stimulus during the pandemic.
Kelly Pedersen, global retail leader at PWC, said, “consumers are nervous” and that he’s paying particular attention to the lower income demographic. “There is a lot of uneasiness in that group.”
Pedersen did cite some bright spots in the retail sector, including Gen Z demonstrating strong interest in in-store experiences, and apparel being “a nice surprise recently,” in terms of retail sales.
Gregory Daco, chief economist at EY, said, “Generally speaking, the economy is doing quite well, with 3 percent growth in GDP, unemployment low at around 4 percent, household finances on average are still relatively healthy. But if you look out on the horizon, I am concerned about a consumer spending slowdown, as income grows more slowly than consumer spending. We are starting to see some cracks in household financials,” he said, noting that younger families are struggling with delinquencies and higher prices, though he is not expecting a major retrenchment.
Sarah Wolfe, senior economic strategist at Morgan Stanley, said while the fundamentals of the economy are healthy, uncertainties surrounding tariffs, deregulation and immigration “are hitting consumers and businesses. Consumers are concerned and very price sensitive, it’s impacting the ability of businesses to plan ahead.”
