Retail sales are expected to grow at a slower pace in 2025, with projections ranging from 2.7% to 3.7%, according to the National Retail Federation (NRF). While a strong labor market continues to support spending, new tariffs are fueling inflation concerns and dampening consumer confidence.
The NRF warns that consumers, particularly lower-income households, have little room left to cut back after years of managing rising prices. Many have already shifted to budget retailers and discounted options. New trade policies, including a baseline 10% tariff announced by President Trump, are likely to hit the apparel industry hard and increase costs across the board.
Retailers and small business owners are bracing for uncertainty. “The pressure on small business right now is significant,” said Sarah Wells, founder of a maternity apparel brand. “Tariffs threaten our livelihood.”
Despite past resilience fueled by stimulus savings and wage growth, NRF Chief Economist Jack Kleinhenz cautions that hard data now points to a “slower trajectory for consumer spending”, making 2025 a year of cautious navigation for retailers of all sizes.
