Retail Sales Defy Slowdown Fears as US Consumers Spend $5.6 Trillion in 2026

US retail sales are on track to reach $5.6 trillion in 2026, a 4.4% increase over 2025, according to the National Retail Federation. The forecast, developed with Oxford Economics, compares with a 10-year average of 3.6% and signals that household spending remains a pillar of economic support even as inflation hovers at 3.2% and geopolitical tensions persist.

Key Takeaways

• US retail sales are forecast to grow 4.4% to $5.6 trillion in 2026, above the 3.6% 10-year average.
• Retail profit margins hit 5.8% in Q1 2026, the highest non-pandemic reading since Q4 2000.
• Retail and food services sales were up 6.9% year over year as of May 2026, according to Census Bureau data.
• The Redbook weekly same-store sales metric reached 11.5% year over year in early July, its highest since 2022.
• Food-at-home prices are forecast to rise 2.5% in 2026, while overall food prices increase 3.0%.

How Strong Is US Retail Sales Growth in 2026?

The latest data paint a picture of remarkable resilience. Census Bureau figures show retail and food services sales were up 6.9% year over year as of May 2026. The Redbook weekly same-store sales metric, a leading indicator, rose for six consecutive weeks to reach 11.5% year over year in early July — its highest reading since 2022.

Month-over-month performance has been uneven but consistently positive. Retail sales rebounded 1.2% in August, reversing July's decline and beating consensus expectations of 0.8%. After adjusting for inflation, Q3 spending is tracking a robust 3% annualized, only a modest deceleration from Q2's 3.4%.

NRF Chief Economist Mark Mathews noted that the spending outlook remains bifurcated, with higher-income households driving the majority of growth across a range of retail categories. Tax refunds associated with the Working Families Tax Cut Act provided a modest boost in the first half of the year.

Are Retail Profit Margins Under Pressure or Expanding?

Despite rising costs, retailers have managed to expand margins. The retail trade profit margin — after-tax profits as a percentage of sales — rose to 5.8% in Q1 2026, the highest share outside the pandemic period since Q4 2000, according to the Richmond Fed.

Deloitte's 2026 Global Retail Industry Outlook found that 96% of retail executives expect revenue growth, while 81% foresee margin expansion in the year ahead. This optimism persists even as cost and margin pressure remains the top concern for retail CEOs in Europe.

Margin performance varies significantly by segment. Non-discretionary retailers have seen EBITDA margins steady at around 6.8%, while discretionary retailers have seen margins fall to approximately 7.5% from a previous 8.3%, according to Scope Ratings. The divergence reflects differing exposure to discretionary spending pullbacks and import cost pressures.

Retail Segment Margin and Growth Comparison: 2026

Source: Scope Ratings, Deloitte, McKinsey, EuroCommerce.

What Does This Mean for Consumer Prices and Household Budgets?

While retail sales are growing, consumers are paying more for essentials. USDA forecasts show food-at-home prices rising 2.5% in 2026, with overall food prices up 3.0%. Grocery prices have climbed 33% since the start of 2019, compared with just 6.4% in the preceding seven-and-a-half years.

Fresh foods have been particularly affected. In Spain, the OCU's 2026 supermarket study found that while the average grocery basket rose only 1.8%, fresh food prices jumped 4.7%, led by an 8.6% spike in fish prices. The study also found that smart shopping across different chains can save a household €1,310 per year on average.

Consumers are adjusting. A New York Times survey of shoppers found many trading down to store brands and cutting back on discretionary items. The same survey found the average cost of a basket of goods rising from $49.70 in 2024 to $5.53 per item in 2026 for certain categories.

How Are European Retailers Facing Different Pressures?

European grocery retail presents a contrast. McKinsey's State of Grocery Retail Europe 2026 report found that grocery sales grew 3.4% in 2025 while consumer prices rose moderately by 2.9%. Cost and margin pressure remains high, with IT and AI investments accelerating.

In Spain, the OCU study analysed 690 points of sale across 38 cities and found significant price disparities. Regional chain Dani retained its crown as the most affordable supermarket, while Sánchez Romero remained the highest-priced with an index of 176 (where 100 is the baseline). Lidl was the most economical option in 60 surveyed locations, up from 18 the previous year.

The OCU issued an urgent call to the Spanish government to cut VAT on essential items including meat and fish, expand food subsidies, and implement measures to prevent suppliers from passing escalating energy costs directly to consumers.

What Risks Could Derail Retail Momentum in 2026?

Several factors could slow the retail sector in the coming months. Inflation remains above central bank targets at 3.2%, and the Federal Reserve has kept rates at 4% after its September hike. Higher borrowing costs weigh on both consumers and retailers.

Geopolitical tensions, particularly the ongoing Middle East conflict, continue to put upward pressure on energy prices. Brent crude remains above $101 a barrel, more than 40% higher than before the Iran war began. For retailers, transport and logistics costs are directly affected.

Tariff uncertainty adds another layer. UNCTAD reports that tariff increases have been uneven across suppliers, with developing economies seeing their relative disadvantage grow from around 1 percentage point to nearly 3 percentage points. Supply chain adjustments and sourcing decisions are being reshaped by these policy shifts.

Frequently Asked Questions (FAQ)

How much are US retail sales expected to grow in 2026?

The National Retail Federation forecasts US retail sales will grow 4.4% in 2026 to $5.6 trillion, above the 10-year average of 3.6%. This reflects continued consumer resilience despite inflation and geopolitical uncertainty.

Are retail profit margins rising or falling in 2026?

Retail profit margins rose to 5.8% in Q1 2026, the highest non-pandemic reading since 2000, according to the Richmond Fed. However, performance varies by segment, with discretionary retailers seeing margins decline while non-discretionary retailers remain stable.

Why are grocery prices still rising in 2026?

USDA forecasts food-at-home prices to rise 2.5% in 2026, with overall food prices up 3.0%. Grocery prices have climbed 33% since 2019, driven by energy costs, supply chain pressures, and geopolitical factors affecting commodity markets.

How does inflation affect consumer spending in 2026?

Despite inflation at 3.2%, retail sales have remained robust, with real Q3 spending tracking 3% annualized growth. Higher-income households are driving most of the growth, while lower-income consumers are more cautious and trade down to store brands.

What are the biggest risks to retail in the second half of 2026?

Key risks include persistent energy price pressures from the Middle East conflict, tariff uncertainty affecting supply chains, and the possibility of further interest rate hikes. Consumer confidence remains fragile, particularly among lower-income households.