Bain & Company has forecast a slowdown in retail sales growth across major Western markets in 2026, as ongoing financial pressure continues to weigh on consumer spending in both the U.S. and Europe.

In its 2026 Global Retail Sales Outlook, the consultancy analyses retail sales prospects in the U.S., UK, France and Germany, assessing how macroeconomic conditions and shifting shopper behaviour are set to shape the year ahead.

It warns that retailers must double down on their customer value propositions and make more effective use of AI across operations.

“Consumers continue to face financial pressure, driving our forecast for slower retail sales growth in the U.S. and Europe in 2026,” said Aaron Cheris, global head of Bain’s Retail practice. “This year’s industry leaders will need to sharpen their customer value propositions, giving shoppers compelling reasons to choose them over competitors and AI platforms. They must utilise AI in ways that expand the value-creation capability of the entire business.”

Cost-of-living pressures impact confidence in the U.K

In the U.K. retail sales growth in the UK is forecast to reach 2% in 2026, with inflation expected to stabilise at around 2.5%. The consultancy expects volume growth to be flat in food and slightly negative across non-food categories.

Bain said persistent cost-of-living pressures, elevated mortgage rates and a gradually softening labour market are continuing to weigh on consumer confidence. Discretionary spending is expected to remain subdued as value-focused shoppers trade down and seek out discounts. While recent interest rate cuts may offer some relief, Bain cautioned they are unlikely to materially boost disposable incomes before 2027.

U.S. retail growth slows as consumer value-seeking intensifies

Bain forecasts U.S. retail sales growth of 3.5% year-on-year in 2026, taking the market to $5.3 trillion, down slightly from an estimated 4.0% growth rate in 2025. Volume growth is expected to remain modest, with inflation projected to sit between 2.6% and 3.0%.

The outlook reflects mounting consumer strain and weakening confidence amid economic uncertainty, rising unemployment and slowing labour supply growth. Bain’s Consumer Health Index shows sentiment among higher-income households, which account for more than half of total spending, declined in January 2026. As shoppers increasingly shift towards lower-priced and private-label products, a continued “flight to value” is likely to cap nominal sales growth. However, lower fuel prices, reduced taxes and potential interest rate cuts could provide some support to spending.

France sees near-flat retail growth as household pressures offset by strong savings

Retail sales growth in France is expected to remain subdued at 1.5% in 2026, down from an estimated 1.7% in 2025, with volume growth largely flat as inflation normalises between 1.3% and 1.7%.

Bain said rising unemployment and elevated mortgage rates are putting pressure on household finances, although high savings levels and a falling household debt-to-income ratio are helping to cushion budgets and support modest sales growth.

Germany’s retail growth moderates as cautious consumers rein in spending

Germany’s retail sales are forecast to grow by 2.5% in 2026, down from 3.6% in 2025, with inflation expected to hold at around 2.2%, supporting moderate underlying volume growth.

Consumer confidence remains fragile as households prioritise saving over spending amid ongoing cost-of-living pressures and rising unemployment. Offsetting these headwinds, however, are wage growth outpacing inflation and increased government spending on infrastructure and defence.