Nation’s largest retail group forecasts 4.4% gain in retail sales for this year despite volatility

U.S. retail sales are projected to grow at a faster pace in 2026 despite ongoing economic uncertainties, according to a new forecast released Wednesday by the National Retail Federation (NRF).

The nation’s largest retail trade group expects retail sales to increase by 4.4% in 2026, reaching $5.6 trillion. This growth rate surpasses the 3.9% increase recorded in 2025 and exceeds the 3.6% average annual growth seen over the past decade, excluding the pandemic years from 2020 to 2022 when consumer spending patterns were unusually high.

“The U.S. economy was a bit up and down in 2025,” said Mark Mathews, chief economist of the NRF. “However, the one bright spot through these ups and downs was the consumer whose continued spending was a key economic driver in 2025. We expect this strength to continue in 2026.”

The forecast, developed in partnership with Oxford Economics, excludes sales from auto dealers, gas stations, and restaurants, focusing primarily on core retail sectors.

Despite the optimistic outlook, the NRF acknowledged significant uncertainties that could impact consumer spending, particularly the ongoing conflict in Iran. The organization noted that the repercussions of the Iran war on retail spending remain too uncertain to incorporate into its current forecast.

Oil prices have surged nearly 50% since the conflict began, with gasoline prices following closely behind. This rapid increase in energy costs could potentially dampen consumer spending in other sectors if the trend continues. Mathews indicated that the forecast might require revision in the coming months if the war begins to significantly impact retail sales patterns.

Additional warning signs appeared in Wednesday’s Labor Department report, which showed U.S. wholesale prices increased by 3.4% in February, higher than expected. The rise was partially driven by sharp increases in food costs. Notably, these price gains occurred before the U.S. and Israeli military actions against Iran further pushed energy prices higher.

The retail industry is closely monitoring these developments, as prolonged inflation in essential categories like food and energy could reduce consumers’ discretionary spending power, potentially affecting retailers of non-essential goods.

Despite these challenges, the NRF remains confident in its forecast, citing several fundamental economic factors that support continued consumer spending. While consumer sentiment surveys have shown a relatively downbeat mood among shoppers, the NRF pointed out that sentiment has historically been disconnected from actual spending behaviors.

Instead, the organization emphasizes that wage growth, healthy household balance sheets, and a robust employment market continue to underpin consumer spending capabilities. Though labor market conditions are expected to weaken somewhat, the NRF projects that the unemployment rate should remain below 4.5% throughout 2026, preserving a relatively strong job market.

The retail landscape continues to show a significant divide between consumer segments, however. Mathews noted that spending patterns remain “bifurcated between higher- and lower-income consumers,” with affluent households driving the majority of retail growth across various sectors.

This split reflects broader economic inequality trends, where higher-income consumers have generally recovered more fully from pandemic disruptions and inflation impacts, while lower-income households continue to feel greater pressure from rising costs for essentials.

Retailers are adapting their strategies accordingly, with many major chains developing dual approaches that cater to both value-conscious shoppers and premium customers seeking higher-end products and experiences.

The NRF’s forecast serves as an important benchmark for the retail industry as it plans inventory, staffing, and promotional strategies for the coming year amid a complex economic and geopolitical landscape.