The National Retail Federation says consumer spending remained a key bright spot for the U.S. economy in 2025, even as inflation, policy uncertainty, and global tensions continued to create challenges.

According to the NRF, retail sales grew nearly 4 percent in 2025 compared to the year before, reaching a record $5.4 trillion. Holiday sales also topped $1 trillion for the first time.

NRF Chief Economist Mark Mathews said low unemployment, steady wage gains, and larger tax refunds have helped support consumers as they continue balancing budgets while still spending on key purchases. The group is forecasting retail sales growth of 4.4 percent in 2026, which would be above the average growth rate seen in the decade before the pandemic.

Even so, the outlook is not without concerns. Lingering inflation, possible tariffs, and uncertainty tied to the war in Iran could all impact supply chains and energy prices in the months ahead.

Retail earnings have also shown that consumers are still spending when they see quality and value. Costco CFO Gary Millerchip said shoppers continue responding to strong value and new products, helping support sales results despite outside pressures such as tariffs and port disruptions.

At the same time, spending trends are not equal across all income groups. Former Moosejaw CEO Eoin Comerford said higher income households are driving a growing share of consumer spending, pointing to what he called a more “K-shaped” economy.

Younger shoppers are also helping reshape retail trends. Experts say Gen Z consumers can be quick to switch brand loyalty, forcing companies to work harder to connect with them through social media and other digital platforms.

Consumers are also continuing to spend heavily on experiences. Restaurant sales are expected to reach $1.55 trillion this year, while leisure travel spending remains above $800 billion annually.

Despite the strong consumer activity, analysts warn that risks remain, especially if higher wage earners are hit by stock market losses, white collar job cuts, or continued global instability.