Rain on a Sunny Day: An Apt Metaphor for Retail in 2026

"Have you ever seen the rain coming down on a sunny day?"

"Have You Ever Seen the Rain," one of my favorite songs from Credence Clearwater Revival, is as close to a metaphor I can think of for the economy. Things that should seem good may actually be bad. Some things just don’t make any sense. It’s as confusing as it is frustrating.

Will 2026 be a good year or bad? Easy or hard?

Whenever I try to make sense of a market, I always start with consumers. How are they feeling about the economy? Are they optimistic or pessimistic? How are they actually spending? Consumer behavior is often the most accurate predictor of short-term retail sales.

Except right now, it isn’t.

Consumer confidence continues to be low, with confidence weakening for a fifth straight month to 89.1 in December 2025. The Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, has now tracked at the threshold of "recession ahead" for 11 consecutive months, according to The Conference Board.

The Consumer Confidence Index® graph shows that consumer confidence today is near where it was in 2020-2021.

Yet, overall U.S. Gross Domestic Product (GDP) grew over 4% in 2025 Q3, according to the U.S. Bureau of Economic Analysis.

How can the economy be growing while consumers are less and less optimistic about the future?

The explanation is in the data, but you have to dig to uncover what we as retailers already sense: many Americans have been left out of the country’s economic expansion, while upper-middle and upper-income consumers have enjoyed gains in their investment portfolios and home values that far outpace inflation.

Meanwhile, the lower-middle and low-income consumers who mostly rent, don’t own their homes, and don’t have investments in the equity markets have seen their actual spending power drop as the price of everything, including automobiles, housing, education, medicines, and food, have continued to rise.

Especially food.

In fact, food prices are probably a way better indicator of the economy’s true health than a lot of other economic indicators. The food at home index rose 1.9% in 2025; food away from home rose 3.7% in 2025, according to the U.S. Bureau of Labor Statistics. 

Feeding a family of four at Chipotle costs $80-90, and “value meals” at fast food restaurants edge over $15, it’s hard to feel optimistic about the economy. And it’s the same with prices in our stores. It was eggs last year, now it's beef that gets the attention, but if you look through the pricing files that go out to retailer stores, very few ever come down and most of them continue to inch up.

Oddly, consumer spending looks like it is holding steady, even as consumer confidence scores look grim. How can it be sunny and rainy at the same time? Look inside the numbers. Average basket size growth in our stores just means shoppers are spending more, it doesn’t mean they are getting more. Compounded inflation since 2020 means $100 worth of groceries pre-COVID now costs $125 or more depending on the area of the country.

And I predict that wholesale food prices will continue to rise in 2026, at least through the first half of the year.

The biggest cost of food is transportation. The costs for diesel fuel and the drivers to move food from field to processor to manufacturer to retailer aren’t coming down. Neither is the labor to load and unload trucks.

And though the direct effects of the U.S. tariff programs are difficult to see, the effects on cost of goods continues to build. The Trump administration has finally started to eliminate tariffs on food products, but tariffs continue on fertilizer, farm machinery, aluminum, and some imported plastics; these costs flow through the food supply chain as a penny here, a penny there. We don’t think of the costs of grocery store consumables like plastic wrap and the packages to put baked goods in, but they are part of the reason for the increased cost of food in the U.S.

And those costs have never been higher in our stores.

The other issue with tariffs is the effect of unsubstantiated supplier price increases, using tariffs as a cover. Modern supply chains are so complicated, some vendors will justify raising prices, whether or not tariffs have actually caused price increases from their suppliers. Pay close attention to manufacturer net margins over the next few quarters.

Most articles talking about 2026 and beyond focus on AI, GLP-1s, or the midterm elections; those are all worthy of discussion, but to most Americans, it’s the prices of feeding their families that matters most.

What to Look Out For in 2026

First, pay attention to the percentage of products sold on discount in your stores. Shoppers will be looking for deals and good news, taking advantage of sales more often. Review your promotional signage, make sure deals are easy to spot. Consider doing more weekly emails, identifying the biggest savings in the store. Shoppers who miss out on savings they should have received are shoppers that are most likely to flee to a big discounter like Walmart.

Second, pay attention to pet and other fringe categories. Categories like pet and baby drive higher average basket size, and high trip frequency. And in both instances total basket margin is higher with the presence of pet and baby products — almost 200 basis points! But these shoppers will take their total baskets somewhere else if they can’t find the brands or deals they can find elsewhere.

The good news is that IGA has worked with suppliers in many categories, including pet, and can show our retailers who to protect and grow both categories. Follow tips from IGA's partners and experts in these categories, see sales increase, and shopper loyalty grow too!

Third, consider a loyalty program. Shoppers need to feel like someone is helping them feed their family. Loyalty programs can keep shoppers engaged with your brand. More than just a deal program, a true modern loyalty system lets you customize offers for shoppers based on the brands and categories they buy. If ever there was time to look at embracing a loyalty program, now is the time. IGA Red Oval Partners AppCard, BRdata, Inmar, and RSA America all offer loyalty programs to our members. 

Finally, get your DSD and bottlers together and build a plan to bring additional savings into the aisle. Whatever you did last year isn’t enough — shoppers need savings more than ever before, especially the middle- and lower middle-income Americans who tend to favor our stores. It’s a fair question to suppliers, "What unique offer can we run each week to reward shoppers for favoring independent stores?"

With social media, online digital tools, the IGA National Digital Ad and more, we have so many more tools to get savings messages out to shoppers. That means our branded partners will get a lot more for their investments than ever before, too. That’s good for them, good for us, and good for Americans who need more help than ever before. That’s the way we all grow even if it’s a stormy year ahead.