What: The 2026 Economic Outlook for Europe reveals shifting consumer spending patterns and ongoing challenges for the retail sector.

Why it is important: Economic pressures and evolving consumer sentiment are driving structural changes in European retail.

The 2026 Economic Outlook for Europe paints a picture of a retail sector at a crossroads, contending with both signs of recovery and persistent structural headwinds. While consumer spending momentum improved in the UK and Eurozone during 2025, this was largely influenced by seasonal and regional factors, and the overall mood remained cautious. More than half of European consumers expressed pessimism, leading to a clear split between essential and discretionary spending. The retail sector’s distress reached its highest level since 2009, with Germany particularly affected by weak demand and tighter credit conditions, resulting in widespread restructuring and job losses. As real wages and purchasing power began to recover, the focus shifted from affordability to availability, with supply constraints and labour shortages presenting new challenges. Despite these obstacles, the sector demonstrated adaptability, with e-commerce turnover rising 7% in 2024 and digital transformation, regulatory changes, and circular economy initiatives reshaping the competitive landscape. Retailers are now compelled to rethink strategies to remain resilient in the face of ongoing economic and consumer shifts.

IADS Notes: The outlook aligns with July 2025 data showing improved spending momentum (Visa) and June 2025 reports of consumer pessimism and sector distress (BCG, BoF). By January 2026, the focus had shifted to availability and operational agility (The Economist), while October 2025 data highlighted e-commerce growth and the importance of digital transformation and regulatory adaptation (Ecommerce Europe).

Europe 2026 Economic Outlook