Strong Consumer Activity Fuels 2026 Outlook, Despite Risks.

The U.S. economy experienced fluctuations throughout 2025, marked by policy uncertainty, inflation and shifting global dynamics.

“However, the one bright spot through these ups and downs was the consumer, whose continued spending was a key economic driver in 2025,” said National Retail Federation (NRF) Chief Economist Mark Mathews during the group’s State of Retail & the Consumer presentation earlier this month.

Retail sales grew nearly 4% in 2025 over 2024 to a record $5.4 trillion, according to the NRF. Holiday sales surpassed $1 trillion for the first time, and the NRF forecasts stronger growth in 2026.

Low unemployment, steady wage gains and larger tax refunds are supporting a stable foundation, Mathews said, as consumers balance budgets while prioritizing key purchases.

The NRF expects retail sales to grow 4.4% in 2026, a forecast developed with Oxford Economics and above the 3.6% average growth seen in the decade before the pandemic. The outlook is supported by macroeconomic factors but does not account for risks tied to the war in Iran.

Consumers are expected to benefit early in the year from stimulus driven by larger tax refunds under the Working Families Tax Cut Act. Inflation may remain elevated in the first half of 2026 but is projected to ease by the third quarter, with much of the expected retail growth reflecting real gains in volume.

Challenges remain, including lingering inflation, potential tariffs and geopolitical instability. The war in Iran has added uncertainty around global supply chains and energy prices.

Retail earnings highlight continued consumer resilience, particularly among warehouse clubs.

“As we look at the overall state of the consumer and our members and how they’re shopping, I think it really is a continuation of trends we’ve seen over the last few quarters, where members are very focused on quality and value and exciting new items are very important,” said Costco CFO Gary Millerchip.

“When you deliver on those things, we’re seeing our members are willing and have the capacity to spend. The fact that our buyers continue to find new and exciting items has resulted in our overall sales results each month when you strip out the noise around calendar shifts and short-term issues like port strikes and tariffs.”

Spending patterns remain uneven across income groups.

“We are increasingly seeing a K-shaped economy where the rich get richer and the poor get poorer,” said Eoin Comerford, former CEO of Moosejaw. “For the first time last year, the top 10% of earners drove 50% of all consumer spending. If you are a category (like outdoor) or a retailer (like Macy’s or Bloomingdale’s) that is driven by upper-income earners, then things are fine. If you’re making $200,000 a year, then an extra $0.50 for a gallon of gas isn’t going to impact your wider spending decisions.”

Younger consumers are also reshaping retail trends.

“Gen Z is now defining themselves as consumers. They’re loyal to a brand until they’re not,” Powell said. “There’s a brand that they fall in love with right now, and in four weeks, they could change their mind to find another brand. And so it’s very difficult to hang on to them. You have to communicate to them in the ways that they want to be communicated to, which is social media.”

Consumers continue to prioritize experiences alongside goods. Restaurant sales are projected to reach $1.55 trillion this year, while leisure travel spending exceeds $800 billion annually. Surveys show 90% of consumers have travel plans in the next six months.

Even so, risks remain.

“The biggest risks are those that impact these high wage earners, e.g., a major increase in white collar unemployment due to AI or tariffs, or a major drop in the stock market (the top 10% own 87%-90% of U.S. stocks),” said Comerford. “The drop could be driven by the AI bubble bursting, the global oil shock from an extended war in Iran or the same white-collar job losses.”