The National Retail Federation (NRF) forecasts that retail sales in 2025 will see growth between 2.7% and 3.7%, reaching a total of $5.4 trillion to $5.5 trillion. This growth is attributed to a relatively strong labor market aligning with last year’s 3.6% sales growth and the average growth rate of the decade before the pandemic. However, the NRF expects GDP growth in 2025 to be down nearly 2% compared to previous years.
Solid economic fundamentals, such as strong employment and wage growth, supported retail sales in 2024 and are expected to continue influencing consumer spending in 2025. Despite these positive indicators, U.S. trade policies are disrupting the retail landscape. President Donald Trump’s announcement of a universal baseline tariff of 10% and specific duties on various countries has added to the ongoing challenges faced by retailers, particularly in the apparel industry.
The tariffs are contributing to higher prices and economic instability, which could potentially deter U.S. consumers. Katherine Cullen, NRF’s vice president of industry and consumer insights, highlighted the importance of consumers in driving economic growth and productivity. She noted that consumers had been fueling retail sales growth over the past few years, aided by pandemic-related stimulus support.
However, the current tariffs are testing consumers and businesses alike. Many consumers have already shifted to cheaper options and turned to discount retailers, leaving little room for further budget cuts. Lower-income consumers, who have been grappling with high prices on essential goods, are particularly concerned about the impact of tariff-related price increases.
During an NRF event, industry experts shared their perspectives on the challenges posed by tariffs. Sarah Wells, founder and CEO of a company specializing in products for new mothers, emphasized the uncertainty created by tariffs as the biggest challenge facing her small business. She highlighted the need for small businesses to advocate for themselves and address the potential threats posed by tariffs on their livelihood.
NRF Chief Economist Jack Kleinhenz noted that while consumers have historically defied expectations by spending at healthy rates despite tightening budgets, there are signs indicating a tougher road ahead for retail. Factors such as employment data, income trends, and tariff-induced inflation point towards a slower trajectory for consumer spending.
In conclusion, the NRF’s forecast for retail sales growth in 2025 reflects a mix of positive economic indicators and challenges posed by trade policies. As retailers navigate through uncertain times, understanding consumer behavior, adapting supply chains, and advocating for fair trade practices will be crucial for sustaining growth in the retail industry.
