What's happened
The National Retail Federation forecasts a 4.4% rise in US retail sales for 2026, driven by consumer spending, wage growth, and employment. However, rising oil prices due to the Iran conflict pose risks, with inflationary pressures and uneven consumer sentiment complicating the outlook.
What's behind the headline?
The current retail forecast reflects resilience amid geopolitical uncertainty. Despite the Iran war pushing energy prices sharply higher, consumer spending remains strong, underpinned by wage growth and a robust job market. However, the forecast is cautious, as rising energy costs threaten to dampen discretionary spending. Retailers like Macy’s and Gap are adapting through store modernization, exclusive merchandise, and focusing on core products like jeans and basics, which continue to resonate with consumers. The divergence in spending between income groups suggests a bifurcated economy, with higher-income households driving growth while lower-income families pull back. This uneven pattern indicates potential volatility if inflation persists or worsens. The forecast could be revised downward if energy prices continue to surge or if consumer sentiment deteriorates further. Overall, the retail sector’s outlook hinges on geopolitical developments and inflation trends, which will shape consumer behavior and corporate strategies in the coming months.
What the papers say
AP News reports that retail sales are expected to grow by 4.4% in 2026, despite uncertainties from the Iran war and rising energy prices. Mark Mathews of the NRF highlights that consumer strength is supported by wage growth and employment, but warns of potential revisions if energy prices impact spending. Meanwhile, AP News also notes Macy’s and Gap are successfully modernizing and focusing on core products to boost sales, even as they face inflation and tariffs. The contrasting perspectives show optimism about retail resilience but acknowledge risks from geopolitical tensions and inflationary pressures, which could alter the outlook if energy costs continue to rise or consumer sentiment shifts significantly.
How we got here
In 2025, US retail sales grew by 3.9%, with the forecast for 2026 exceeding the 10-year average. The outlook considers ongoing economic factors like wage growth and employment, but also the impact of geopolitical tensions, notably the Iran war, which has increased oil and gas prices, adding inflationary pressures. Retailers are adjusting strategies amid tariffs, inflation, and shifting consumer behavior, especially between higher- and lower-income groups.
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