Consumer Anxiety Could Mean Slower Retail Sales Growth This Year

Retail spending growth is expected to slow in 2025, according to new data, with lingering inflation and anxiety about tariffs weighing on consumer confidence.

Americans will spend 2.7% to 3.7% more with retailers in 2025, generating about $5.42 trillion to $5.48 trillion in sales, according to a forecast the National Retail Federation, a trade group, released Wednesday. That compares to a 3.6% year-over-year growth in 2024, when consumers spent $5.29 trillion on “core” retail, which excludes restaurant, car and gas purchases, NRF said.

“A lot is riding on the consumer,” NRF Chief Economist Jack 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 isn’t “unraveling,” Kleinhenz said, but it has been sluggish. That may present larger problems, since consumer spending accounts for about 70% of US gross domestic product, a measure of economic growth.

Some companies are anticipating a pullback. Home goods company Williams-Sonoma (WSM) said last month that its sales in the year ahead might decline. American Eagle Outfitters (AEO) forecast last month that revenue in the coming year would drop, with CEO Jay Schottenstein saying people have become “very conservative.”

Retailers have said low-income consumers are hurting; Dollar Tree (DLTR) CEO Michael Creedon described the pressure as widespread and recently said “everybody is hurting right now.” He said that the discount retailer has gained traction with higher-income households looking to save, a trend Walmart (WMT) has also observed.

Restaurant and bar sales dipped 1.5% from January to February, according to the Census Bureau, which estimated that overall spending ticked up 0.2%. Excluding spending on cars, gas and at food service venues, core retail spending fell for the second month in a row, declining 0.2% from January to February, according to estimates published by NRF.

The White House is slated later today to unveil new tariffs. The NRF today said import taxes were making consumers fearful of a spike in inflation. Consumer sentiment dropped for a third consecutive month this March, according to the University of Michigan’s Consumer Sentiment Index, which found Americans uneasy about trade policy, the labor market, business conditions and personal finances.