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From a weaker labor market to inflation, NRF Chief Economist Mark Mathews gave insight on what retailers can expect this year.
Retail sales are forecast to grow 4.4 percent this year to $5.6 trillion, according to the National Retail Federation.
Washington, D.C.—Retail sales are forecast to grow 4.4 percent in 2026, according to the National Retail Federation, reaching $5.6 trillion.
The trade organization announced its forecast during its sixth annual “State of Retail & the Consumer” virtual event on Tuesday, partnering with economic advisory firm Oxford Economics to crunch the numbers.
Retail sales growth was up 3.9 percent year-over-year in 2025.
The 2026 sales forecast compares with 3.6 percent average annual sales growth over the last 10 years, excluding the pandemic period from 2020 to 2022.
Notably, the NRF’s retail sales forecast excludes automobile dealers, gas stations, and restaurants.
The trade organization announced its forecast during its sixth annual “State of Retail & the Consumer” virtual event on Tuesday, partnering with economic advisory firm Oxford Economics to crunch the numbers.
Retail sales growth was up 3.9 percent year-over-year in 2025.
The 2026 sales forecast compares with 3.6 percent average annual sales growth over the last 10 years, excluding the pandemic period from 2020 to 2022.
Notably, the NRF’s retail sales forecast excludes automobile dealers, gas stations, and restaurants.
The NRF’s forecast is also not adjusted for inflation. While inflation is expected to stay above the Federal Reserve’s target, goods inflation is likely to stay within a lower range.
This means that the NRF’s projected sales growth should reflect real gains rather than an inflation-driven rise in spending, the organization said.
Mark Mathews, NRF chief economist and executive director of research, led the forecast segment of the virtual event, giving more insight into the overall economy.
“The U.S. economy was a bit up and down in 2025. However, the one bright spot through these ups and downs was the consumer, whose spending was a key economic driver in 2025,” said Mathews.
That strength is expected to continue in 2026, he said, with consumer spending again providing key support for the economy.
“We also anticipate that this will not be uniform across all income groups,” he noted.
The spending outlook is still bifurcated between higher- and lower-income consumers, typical of what economists refer to as a “K-shaped” economy, with higher-income shoppers driving most of the spending growth across several retail categories.
Consumer spending is expected to get a boost during the first half of the year, said the NRF, due to the tax cuts under the Working Families Tax Cut Act, part of President Trump’s “One Big Beautiful Bill Act.”
While it will result in tax cuts for some families, critics of the bill have argued the benefits will be concentrated to the wealthiest consumers, and the refunds will do little to outweigh the rising costs related to tariffs.
Inflation is expected to remain elevated for the first half of the year before easing up in the third quarter.
The NRF continues to expect a weaker labor market, he said, with non-farm employment remaining muted throughout the year.
However, this isn’t expected to have a significant impact on the unemployment rate, which should remain below 4.5 percent, said Mathews.
“The disconnect between GDP and the labor market should remain pronounced throughout the year, with GDP growth rising mainly from productivity improvements,” he said.
While consumer sentiment isn’t expected to improve, Mathews noted the common disconnect between how people feel and how people spend.
Mathews added that the uncertainty in the Middle East was not accounted for when crafting its forecast, and said the NRF will continue to assess its impact and issue a new forecast if needed. be.
“Renewed tensions in the Middle East and the ripple effects across global markets are adding more uncertainty to the economic landscape,” said Mathews.
“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.”
The full virtual event can be watched here.
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