Despite global conflicts, rising fuel costs, macro-economic uncertainties and declining consumer sentiment, U.S. retail sales will grow in 2026 — and in a bigger way than during the last few years.
That’s according to the National Retail Federation which on Wednesday forecast retail sales will increase 4.4 percent to $5.6 trillion this year. That compares with the 3.6 percent average annual U.S. sales growth over the last 10 years, excluding the pandemic period from 2020 to 2022 when growth was atypical, the NRF reported.
Last year, sales grew 3.9 percent to $5.4 trillion.
“Consumer continued spending and was a key economic driver in 2025. We expect continued strong consumer spending,” said Mark Mathews, chief economist of the NRF, during a webcast where the results were revealed. He cited several factors fueling the retail sales growth, including larger tax refunds, inflation that’s expected to fall off by the third quarter, and unemployment, which remains relatively low at under 4.5 percent.
He also said, “No significant improvements in consumer sentiment are expected, but there is a disconnect between sentiment and spending.” Consumers are concerned about rising fuel costs due to the war in the Middle East and inflation, which has been in the 2 percent to 3 percent range.
A significant portion of the 4.4 percent increase is real growth and not just inflation, the economists said.
“Renewed tensions in the Middle East and the ripple effects across global markets are adding more uncertainty to the economic landscape,” Mathews said. “While the geopolitical environment and ongoing trade policy challenges warrant close attention, we remain optimistic that the underlying fundamentals of the U.S. economy will support continued stability in the year ahead.”
Mathews added that the spending outlook is still bifurcated between higher- and lower-income consumers, with higher-income households driving the majority of growth in spending across a range of retail categories.
“Consumer activity is expected to receive a modest boost in the first half of the year from larger refunds associated with tax cuts enacted under the Working Families Tax Cut Act,” the NRF said. “Inflation is projected to remain elevated through midyear before easing by the third quarter, offering some relief to households as the year progresses. Labor market conditions are expected to soften, with muted non‑farm employment growth throughout much of the year. Even so, the unemployment rate is projected to remain below 4.5 percent…Solid underlying fundamentals, particularly income growth, household balance sheets and labor market stability, are expected to support continued consumer activity in 2026.”
The NRF’s forecast is presented in nominal terms, which doesn’t exclude inflation. “While inflation is expected to remain above the Federal Reserve’s target, goods inflation is likely to stay within a lower band,” the NRF said. “As a result, a meaningful portion of the projected sales growth is anticipated to reflect real gains rather than inflation-driven increases.”
Matthew Shay, president and chief executive officer of the NRF, said: “Consumer spending was a steady and reliable engine of growth in 2025, even as broader economic conditions fluctuated.
“We expect that consumer resilience to continue into 2026, with household spending once again serving as a pillar of economic support.”
The trade group’s forecast was based on what it characterized as an enhanced forecasting approach developed in partnership with Oxford Economics, a leading independent economic advisory firm. The forecast was made during NRF’s sixth annual State of Retail & the Consumer virtual event, which examines the health of American consumers and the retail industry.
