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The National Retail Federation forecast that U.S. retail sales will grow faster in 2026 than in 2025, projecting a 4.4% increase to $5.6 trillion as the consumer continues to spend despite economic volatility. The trade group said it could not reliably incorporate the Iran war’s repercussions into its outlook because the effect on consumer spending remains too uncertain.

NRF set its 2026 forecast using a new model developed in partnership with Oxford Economics, which the group described as an independent economic advisory firm. The NRF projected that sales for 2026 would outpace last year’s growth rate of 3.9%, according to the federation’s statement.

The federation said its 2026 sales forecast also exceeds the 3.6% average annual growth rate over the past 10 years when excluding the pandemic period from 2020 through 2022, when sales growth was outsized. The NRF also said its forecast excludes sales from auto dealers, gas stations and restaurants.

Mark Mathews, NRF chief economist, tied the federation’s optimism to what he described as the consumer’s resilience through fluctuating conditions. “The U.S. economy was a bit up and down in 2025,” Mathews said. “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.”

Even with that baseline, Mathews said the NRF is monitoring the Iran war because it has helped push energy prices higher, with oil prices surging nearly 50% since the war began and gasoline prices following close behind. The NRF said its forecast could be revised in coming months if the war begins to affect retail sales more directly.

The federation pointed to near-term warning signs in broader price pressures. On Wednesday, the Labor Department reported that U.S. wholesale prices came in at 3.4% in February, hotter than expected and driven partly by food costs, and the NRF said those price gains happened before the U.S. and Israel attacks on Iran pushed energy prices sharply higher.

In its outlook, the NRF said consumer sentiment has been downbeat but historically has remained disconnected from actual spending, while spending has been underpinned by wage growth, household balance sheets and a solid employment market. The group said it expects labor market conditions to weaken but forecast that the unemployment rate should remain below 4.5% this year.

The NRF also said the spending outlook is divided between higher- and lower-income consumers, with higher-income households driving the majority of growth in spending across the retail spectrum.