The National Retail Federation (NRF) projects retail sales will grow between 2.7% and 3.7% in 2025, reaching between $5.42 trillion and $5.48 trillion, according to forecasts announced during the organization's fifth annual State of Retail & the Consumer virtual event. While this represents a slight deceleration from 2024's 3.6% growth rate that reached $5.29 trillion, it aligns with the 10-year pre-pandemic annual average growth of 3.6%.

NRF President and CEO Matthew Shay noted that while the economy has shown continued momentum in early 2025, bolstered by low unemployment and real wage gains, "significant policy uncertainty is weighing on consumer and business confidence." Despite these challenges, Shay emphasized that "serving customers will remain retailers' top priority no matter what the economic environment."

The forecast comes as retailers navigate an environment of persistent inflation, changing consumer preferences, and potential policy shifts that could impact both business operations and consumer spending behavior.

Non-store and online sales, included in the total forecast, are expected to grow 7-9% year-over-year, reaching between $1.57 trillion and $1.6 trillion in 2025. This projection follows 8.1% growth in this sector in 2024, when online sales reached $1.47 trillion. The continued robust performance of digital commerce reflects ongoing consumer comfort with online shopping and retailers' investments in omnichannel capabilities.

NRF Chief Economist Jack Kleinhenz projects GDP growth will decline to just below 2% in 2025, down from 2.8% in 2024 and below recent trends. "Any way you look at it, a lot is riding on the consumer," Kleinhenz said. "While we do expect slower growth, consumer fundamentals remain intact, supported by low unemployment, slower but steady income growth, and solid household finances. Consumer spending is not unraveling."

Kleinhenz noted that declining consumer confidence, driven largely by lingering inflation and anxiety over tariffs, doesn't necessarily predict an immediate drop in spending. "It's the hard data on employment, income and tariff-induced inflation — not consumer sentiment — that supports our view of a slower trajectory for consumer spending," he explained.

With the implementation of tariffs, NRF expects Personal Consumption Expenditures price index to remain at the current level of approximately 2.5% throughout 2025. The organization reports household balance sheets appear generally healthy, with delinquencies on auto loans and credit cards rising but still in line with pre-pandemic trends.

During a panel discussion at the event, economists noted differences across consumer segments. Sarah Wolf of Morgan Stanley pointed out that high-income households are driving a disproportionate share of spending, with estimates suggesting "the top 10% is driving 50% of consumer spending." Meanwhile, Greg Daco of EY Parthenon highlighted that "lower income, lower to median income individuals, younger families...are struggling with delinquencies and having to make those difficult trade-offs."

Among potential bright spots for the retail sector, economists at the event pointed to improving productivity, which could support supply-side dynamics and help counter inflation. However, they cautioned about uncertainty surrounding immigration policies, trade tensions, and potential financial market volatility affecting high-income spending.