Retail sales growth to slow across US and Europe in 2026, Bain forecasts

Retail sales growth is expected to slow across the US, UK and major European economies in 2026 as consumers continue to feel financial pressure and discretionary spending remains subdued, according to new forecasts from Bain & Company.

In its 2026 Global Retail Sales Outlook, Bain said macroeconomic uncertainty, cost-of-living pressures and cautious shopper behaviour would weigh on growth in the year ahead, even as inflation eases in most markets.

“Consumers continue to face financial pressure, driving our forecast for slower retail sales growth in the US and Europe in 2026,” said Aaron Cheris, global head of Bain’s retail practice. He added that retailers would need to sharpen their value propositions and deploy artificial intelligence in ways that genuinely enhance customer value, rather than simply cutting costs.

Bain forecasts US retail sales growth of 3.5 per cent year on year in 2026, taking the market to $5.3 trillion. That represents a slowdown from estimated growth of 4.0 per cent in 2025, with underlying volume gains expected to remain modest as inflation hovers between 2.6 per cent and 3.0 per cent.

The consultancy said mounting consumer strain, rising unemployment and slowing labour supply growth were eroding confidence. Its Consumer Health Index shows sentiment among higher-income households, which account for more than half of US retail spending, declined in January 2026.

Shoppers are increasingly trading down to lower-priced and private-label products, creating a “flight to value” that could limit nominal sales growth. However, Bain said factors such as lower fuel prices, reduced taxes and potential interest rate cuts could help stabilise demand.

In the UK, retail sales are forecast to grow by 2 per cent in 2026. With inflation expected to stabilise at around 2.5 per cent, Bain expects volume growth to be flat in food retail and slightly negative in non-food categories.

Ongoing cost-of-living pressures, elevated mortgage rates and a gradually softening labour market are continuing to suppress consumer confidence. Discretionary spending is likely to remain weak, with shoppers prioritising essentials, trading down and seeking discounts.

While recent interest rate cuts could offer some relief, Bain said they are unlikely to materially improve household disposable income before 2027.

France is expected to see near-flat retail sales growth of 1.5 per cent in 2026, slightly down from an estimated 1.7 per cent in 2025. Volume growth is likely to be broadly flat, with inflation forecast to normalise between 1.3 per cent and 1.7 per cent.

Rising unemployment and elevated mortgage rates are weighing on household finances, but Bain noted that high levels of savings and a declining household debt-to-income ratio are helping cushion the impact and support modest sales growth.

Bain forecasts retail sales growth of 2.5 per cent in Germany in 2026, down from 3.6 per cent in 2025. Inflation is expected to remain around 2.2 per cent, allowing for moderate underlying volume growth.

However, consumer confidence remains fragile, with households prioritising saving over spending amid cost pressures and rising unemployment. Bain also warned that ongoing discounting, particularly in grocery, could further cap nominal growth.

Offsetting these headwinds, wage growth is currently outpacing inflation and increased government spending on infrastructure and defence could provide some support to demand.

Across all four markets, Bain said 2026 would be another testing year for retailers, with growth increasingly dependent on value perception rather than volume expansion.

Cheris said: “This year’s winners will be those that clearly articulate why they are the best choice for shoppers, whether through price, experience or relevance, while using 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 distance away.