The data: Storm clouds are rolling in for several of the world’s largest economies.

• US GDP growth is expected to slow to 2% this year, down from 2.8% in 2024, per the IMF.
• China’s economy remains mired in deflation: The producer price index declined for the 36th straight month in September, while the consumer price index fell by 0.3% YoY, more than expected.
• President Donald Trump’s tariffs could shave 0.3% off the EU’s GDP in the short term, according to ING. The Eurozone faces plenty of other pressures, including political instability in France and sluggishness in Germany.
• The UK is expected to have the highest inflation rate among advanced economies this year and next, while GDP per capita will also lag the rest of the G7, per the IMF.

Why it matters: The worsening global economy is creating serious challenges for retailers.

• A combination of sluggish demand and overproduction in China is forcing companies to slash prices to drive sales, eroding margins and fueling price wars.
• Distress in Europe’s retail and consumer goods sector is now higher than during 2009’s global financial crisis, due to weak demand, depressed consumer confidence, and tariffs, according to the Weil European Distress Index.
• Retailers in the US are grappling with higher costs related to tariffs and weakening demand from consumers as their buying power diminishes. While retail sales overall have been resilient thanks to steady spending from higher-income households, cracks are emerging as a worsening labor market and rising expenses squeeze consumers’ wallets.

What retailers can do: As consumers grow more cautious, retailers will need to give them a reason to spend.

• Offering promotions and discounts can help spur spending, but leaning too heavily on markdowns could prompt damaging price wars.
• Loyalty programs with tangible rewards, such as deals or free shipping, can entice shoppers to buy and keep them from switching to lower-priced retailers.
• Having the right product selection—and ensuring items are fresh and innovative—will help encourage visits and maximize full-price sales.

Go further: Read our Worldwide Retail and Ecommerce Forecast 2025 Midyear Edition.

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