As we previewed yesterday, the National Retail Federation held its sixth annual State of Retail & the Consumer event — and the actual forecast numbers are now in. The headline: U.S. retail sales will grow 4.4% year over year to $5.6 trillion in 2026, according to the NRF's freshly released projection.
According to the NRF's press release, that figure covers store-based and online purchases across discount, department, grocery, and specialty retail, but excludes auto dealers, gas stations, and restaurants. It's the strongest forecast the organization has issued since 2022 — and it comes with a significant asterisk we'll get to.
A New Methodology Changes the Baseline
What makes this forecast structurally different from prior years isn't just the number — it's how it was generated. The NRF developed this year's projection in partnership with Oxford Economics, using an enhanced economic model that replaces the organization's previous methodology. Retail Dive reports this shift is designed to improve the forecast's accuracy and transparency, anchoring it in a more rigorous macroeconomic framework.
The practical effect: the NRF is now modeling retail sales growth against a restated baseline. Against that baseline, the 4.4% figure compares favorably to the 3.6% average annual growth the industry has recorded over the past decade (excluding the pandemic anomalies of 2020–2022), making it the strongest real-growth forecast in recent history. Chain Store Age notes that a meaningful portion of the projected gains are expected to reflect genuine volume increases, not just inflation-driven price effects — a nuance that matters greatly for merchants tracking unit sales.
The Two Tailwinds That Explain the Optimism
The NRF's upbeat stance rests on two specific conditions that Mathews highlighted at the event. The first is income growth and household balance sheets: labor markets remain relatively stable, wages are still growing in real terms for higher-income workers, and household debt-service ratios, while elevated, have not reached crisis levels.
The second is more time-bound: larger-than-average tax refunds tied to the Working Families Tax Cut Act are expected to provide a consumer spending boost concentrated in the first half of 2026. Retail Brew notes that this refund timing creates a front-loaded stimulus effect — exactly the kind of spending catalyst that benefits apparel, home goods, and electronics in Q1 and Q2.
Inflation, which has been a persistent headwind, is projected to remain elevated through midyear before easing in Q3, offering some relief to households — and potentially to gross margins — in the back half of the year.
The Bifurcated Consumer Is Still the Central Challenge
One of the most important nuances in the NRF forecast is the one that's easiest to overlook: the $5.6 trillion headline number conceals a deeply uneven distribution. Higher-income households are expected to drive the majority of growth across virtually every retail category. Middle- and lower-income shoppers — already under pressure from food prices, energy costs, and the broader geopolitical disruption we covered in depth today — are spending with far more caution.
This bifurcation has been building since 2022, but the NRF's forecast makes explicit what many retailers are already experiencing operationally: strong aggregate numbers can mask weak performance in the mass-market segments where most brick-and-mortar retail competes. Retailers who use $5.6 trillion as a planning target without segmenting their customer base by income sensitivity may find themselves materially disappointed.
The Forecast Will Be Revised If Necessary
NRF Chief Economist Mark Mathews was direct about one notable exclusion: the ongoing U.S.-Iran conflict was not modeled into the forecast because, in his words, the uncertainty is "currently too much to factor into our forecast." The NRF has committed to issuing a revised forecast if circumstances change materially. Given that Brent crude has already pushed past $126 a barrel and shipping costs are rising in response to the Strait of Hormuz situation, that revision trigger may come sooner rather than later.
For the industry, the NRF's $5.6 trillion figure serves as the most credible planning baseline available — but smart retailers are already building contingency scenarios around a potential downward revision.