The volatility in sales reflects a combination of high prices, rising household debt, and growing concerns about labor market weakness.
The retail industry experienced significant volatility in 2025, as elevated inflation, a weakening labor market, rising household debt, and intensifying competition contributed to uneven retail sales throughout the year.
Looking ahead, the outlook for 2026 remains mixed. Lower borrowing costs may provide some relief to households, but persistent inflationary pressures and a weak labor market are expected to continue to shape the retail environment.
Sales Volatility in 2025
Retail sales started 2025 on a weak footing, falling 0.9 percent in January from the prior month and remaining flat in February, according to Trading Economics. Sales rebounded sharply in March, then declined again in April, followed by gains over the next four months, underscoring a volatile monthly pattern throughout the year.
The volatility in sales reflects a combination of high prices, rising household debt that is straining budgets, and growing concerns about labor market weakness.
After moderating in early 2025, inflation edged higher over the summer, Trading Economics said, with the year-over-year Consumer Price Index hitting about 3 percent in September—above the Federal Reserve’s 2 percent target.
Trading Economics also found that non-farm payrolls, the broadest measure of the labor market, fell from 323,000 in December 2024 to -13,000 in June 2025, reflecting, in part, a measurement-methods adjustment.
Household balance sheets came under additional pressure as debt continued to climb. A Federal Reserve report showed household debt increased by $197 billion to $18.59 trillion in September. Mortgage balances rose by $137 billion to $13.07 trillion, and credit card and student loan balances also increased.
A McKinsey survey conducted in late 2025 highlighted growing consumer anxiety around the cost of living and job security.
The survey found that a rising share of consumers cited “making ends meet” as a top concern, up by 2 percentage points, while worries about job security increased by 3 percentage points from the prior quarter. Generation Z consumers reported particularly acute job-security concerns, driven in part by worries over rising health care costs.
