Retail sales growth in the US, UK and major European economies is expected to slow in 2026 as consumers remain under financial pressure and consumer spending remains subdued, according to new forecasts from Bain & Company.
In its Global Retail Sales Outlook 2026, Bain said macroeconomic uncertainty, cost of living pressures and cautious shopper behavior would weigh on growth next year, even as inflation eases in most markets.
“Consumers continue to face financial pressures, impacting our forecast for slower retail sales growth in the U.S. and Europe in 2026,” said Aaron Cheris, global head of Bain’s retail practice. He added that retailers need to sharpen their value propositions and use artificial intelligence in a way that actually increases customer value rather than just reduces costs.
Bain forecasts U.S. retail sales to grow 3.5 percent year-over-year in 2026, representing a market size of $5.3 trillion. This represents a slowdown from estimated growth of 4.0 percent in 2025, with underlying volume increases expected to remain moderate as inflation fluctuates between 2.6 percent and 3.0 percent.
The consultancy said increasing consumer stress, rising unemployment and slower labor supply growth were undermining confidence. Its Consumer Health Index shows that sentiment among higher-income households, which account for more than half of U.S. retail spending, fell in January 2026.
Shoppers are increasingly turning to cheaper and private label products, leading to a “flight to value” that could limit nominal sales growth. However, Bain said factors such as lower fuel prices, reduced taxes and possible interest rate cuts could help stabilize demand.
In the UK, retail sales are expected to grow by 2 percent in 2026. With inflation expected to stabilize at around 2.5 percent, Bain expects volume growth in food retail to be flat and slightly negative in non-food categories.
Ongoing pressure on the cost of living, increased mortgage rates and a gradually weakening labor market continue to weaken consumer confidence. Discretionary spending is likely to remain weak as shoppers prioritize essentials, buy less and look for discounts.
While recent interest rate cuts could provide some relief, Bain said they are unlikely to significantly improve household disposable income until 2027.
France is expected to record almost flat retail sales growth of 1.5 percent in 2026, slightly lower than the estimated 1.7 percent in 2025. Volume growth is expected to be broadly flat, with inflation forecast to normalize between 1.3 percent and 1.7 percent.
Rising unemployment and increased mortgage rates are weighing on household finances, but Bain noted that high savings and a falling household debt-to-income ratio are helping to cushion the impact and support modest sales growth.
Bain forecasts retail sales in Germany to grow by 3.6 percent in 2026 by 2.5 percent in 2025. Inflation is expected to remain at around 2.2 percent, allowing for moderate underlying volume growth.
However, consumer confidence remains fragile as households prioritize saving over spending amid cost pressures and rising unemployment. Bain also warned that continued price discounts, particularly in food, could further slow nominal growth.
To offset these headwinds, wage growth is currently outpacing inflation and higher government spending on infrastructure and defense could provide some support to demand.
Across all four markets, Bain said 2026 would be another testing year for retailers as growth increasingly depends on value perception rather than volume expansion.
Cheris said: “This year’s winners will be those who clearly articulate why they are the best choice for buyers, whether through price, experience or relevance, while leveraging AI to expand the value creation capability of the entire business.”
The outlook suggests that while the worst of the inflation shock may be over, a full recovery in consumer-led retail growth remains some way off.
