At the sixth annual State of Retail & the Consumer virtual event, the National Retail Federation (NRF) issued its 2026 forecast calling for U.S. retail sales to climb 4.4 percent over 2025 to $5.6 trillion, with the strong gains supported by resilient consumers despite market uncertainty. The forecasted growth rate is well ahead of the 3.6 percent average annual sales growth over the last 10 years.

The 3.6 percent rate excludes the pandemic period from 2020 to 2022, when growth was atypical. NRF’s outlook focuses on “core retail sales” and excludes auto dealers, gas stations and restaurants.

The NRF’s forecast was developed for the first time in partnership with Oxford Economics, an independent economic advisory firm, to “help us sharpen the economic outlook for the retail sector,” said NRF Chief Economist and Executive Director of Research Mark Mathews during the event.

Mathews said the NRF’s robust forecast primarily reflects confidence that consumer spending will remain resilient despite uncertainty caused by the Iran war and other concerns.

“The U.S. economy was a bit up and down in 2025; however, the one bright spot through these ups and downs was a consumer whose continued spending was a key economic driver in 2025,” said Mathews. “We expect the strength to continue in 2026 with consumer spending once again providing key support for the economy.”

“Consumer spending was a steady and reliable engine of growth in 2025, even as broader economic conditions fluctuated,” NRF President and CEO Matthew Shay said in a statement. “We expect that consumer resilience to continue into 2026, with household spending once again serving as a pillar of economic support.”

Among the factors supporting spending in 2026, Mathews noted that in the first half of 2026, NRF’s forecast calls for a “degree of stimulus to spending,” driven by larger refunds from tax cuts in the Working Families Tax Cut Act.

The NRF’s forecast assumes inflation remains elevated in the first half of the year, but should fall off by the third quarter, “providing a bit of relief to consumers in the latter half of the year,” said Mathews.

The economist noted that its forecast is presented in nominal terms, meaning it’s unadjusted for inflation. Mathews said that while the forecast assumes the inflation rate remains above the Fed’s target of two percent for the year, “we also expect goods inflation will remain in a slightly lower band, meaning that a significant proportion of NRF’s forecasted growth will actually be real growth, and not just an inflation-induced rise in spending.”

Bifurcated Economy Expected To Continue
Mathews added that the spending outlook is expected to remain bifurcated between higher- and lower-income consumers, with higher-income households accounting for a larger share of growth than lower- and middle-income households.

Other assumptions in the forecast include “weaker” labor-market conditions, with muted non-farm employment growth throughout much of the year. Even so, the unemployment rate is projected to remain below 4.5 percent. Mathews added, “The disconnect between GDP and the labor market should remain pronounced throughout the year, with GDP growth rising mainly from productivity improvements.”

NRF also does not expect “significant improvements in consumer sentiment,” although NRF has found that sentiment has remained historically disconnected from actual spending patterns. NRF said in a statement, “Solid underlying fundamentals, particularly income growth, household balance sheets and labor market stability, are expected to support continued consumer activity in 2026.”

A wild card is the Middle East conflict. Mathews said there is “currently too much uncertainty to factor these events into our forecast, but we will continue to assess potential impacts and issue a reforecast if circumstances dictate.”

Mathews said in the NRF statement, “Renewed tensions in the Middle East and the ripple effects across global markets are adding more uncertainty to the economic landscape. 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.”

Perspectives from the Restaurant and Travel Sectors
During the event, Mathews was joined by Joshua Friedlander, VP of Research at the U.S. Travel Association, and Chad Moutray, SVP for Research & Knowledge and chief economist at the National Restaurant Association, to hear their views on the year’s growth prospects.

Moutray noted that the National Restaurant Association’s 2026 State of the Industry Report predicted restaurant and foodservice sales would climb 4.8 percent to $1.55 trillion this year. The gains are largely expected to be driven by higher menu prices. However, excluding the impact of menu inflation, sales are expected to increase 1.3 percent, about in line with 2025.

Moutray said, “There’s quite a bit of resilience out there. In general, when I talk to restaurant operators, it’s a pretty challenging year, right? The math is difficult… Costs have gone up, and profit margins have been squeezed pretty significantly. And yet you still see people going out and eating, right?”

Moutray said surveys conducted as part of his association’s State of the Industry Report showed consumers are prioritizing going out to eat. He elaborated, “You get tired of doing dishes. You get tired of cooking, right? You get tired of just trying the same old thing again. You want to go out and have new menu items, and you want to celebrate those big occasions, right? And so even when you’re pulling back in other areas, you might still want to go out to restaurants.”

Moutray added, “It doesn’t mean that restaurants aren’t challenged, and you certainly hear that in some of the other data points, and there’s a K-shaped phenomenon there that’s going on in it. But that resilience, I think, really speaks to the fact that in 2026, actually, there’s a lot of tailwinds in the economy, and we expect people to go out to eat to celebrate those big occasions.”

Mathews remarked that the core retail segment is seeing similar motivators with consumers. He said, “People want to go out, and they want to treat themselves, right? You want to go out and enjoy things. You want to spend time with your family. You want to spend on your family…All that’s really important.”

Friedlander said the U.S. Travel Association, which supports broad groups ranging from hotels and airlines to “attractions and destinations,” expects leisure travel revenues to expand “little more than 2 percent” in 2026. He added, “So, not the huge numbers of the post-COVID recovery, but still some solid increases year over year.”

He said the travel industry faces a “few headwinds” this year, including the economy and inflation, but pointed to the likely benefit of “a lot bigger” tax refunds, expecting about 9 percent of the money to shift toward travel spending. However, he also cited the longstanding appeal of travel among Americans despite challenges.

“Resilience” is “exactly the word that we’ve been using to describe American travelers,” Friedlander said. He noted that despite inflationary concerns, there were eight days in 2025 when three million or more people traveled, a feat that had only ever happened twice before 2025.

“People are still out there,” said Friedlander. “They’re prioritizing those experiences. Like going to restaurants, they are still prioritizing travel. We’ve seen some surveys where we ask about what your travel plans are going forward, and 90 percent of people say they have a trip planned within the next six months.  And that’s right at the highest level we’ve seen historically. So, we continue to see people prioritizing travel despite those challenges, plus there are some hopeful drivers this year.”

Image courtesy 2nd Street, Austin, TX