The Economics of 2026: Outlook for Consumers

Back at the beginning of 2025, the economic outlook was fairly grim, but the year ultimately unfolded differently than many had expected, proving the economy was much more resilient than many had feared. Going into 2026, it’s impossible not to be realistic about geopolitical tensions and conflicts, as well as the shock of recent inflation events. The IMF’s World Economic Outlook update predicts global GDP growth of 3.3% this year, a rise of 0.2 percentage points from the estimates of October.

However, that doesn’t mean that there won’t be any challenges for markets, businesses, and consumers. Many of these challenges can be anticipated based on the changes that occurred in 2025, as several are an extension or a reflection of previous, longstanding issues. Conditions are still fairly fragile, but understanding the circumstances that surround them can be very helpful when navigating the environment.

The advance of artificial intelligence

AI has consistently been one of the hottest topics of the last couple of years and is set to stay that way in 2026. Many businesses and institutions have begun integrating AI-based tools into their processes, such as helping with business email automation, removing repetitive and extraneous tasks, streamlining supply chains, and improving data analysis. Nonetheless, experts say that this is just the beginning and that the true scope of what AI can do is far from revealed.

The technology is expected to feature heavily in the global economy, with companies set to invest much more into data centres, automation, and IT in order to boost productivity and innovation. Remaining competitive is also of paramount importance as the enterprises that don’t keep up with the market demands are likely to fall behind. At the same time, others are wondering if this scenario is realistic, given the fact that the AI bubble is expected to burst (an event that will most likely have a tremendous impact on the economy).

If that happens, the enthusiasm will most certainly wane. Data shows that a tech bubble bursting is among the largest risks for the current year, with nearly 60% saying that it is one of their three biggest concerns.

The inflation rates

Inflation will remain an issue in 2026, but its intensity has cooled down and will continue to do so. Most households have been dealing with difficulties as a result of elevated living costs, with many people struggling to make ends meet. Yet, there’s hope that there will be a consistent slowdown in the rate of consumer price growth, with economists believing that a “normalisation” of inflation is underway. This trend could lead to central banks decreasing their continuous cycles of cutting interest rates, meaning that restrictions on the economy will occur and that the high borrowing costs won’t be as much of an impediment anymore.

According to economists, the UK still qualifies as a disinflation laggard, an economy where the rate of price increases falls at a much slower pace compared to peers. These conditions maintain inflation rates above their targets for a longer period of time. In the United Kingdom, much of the inflation has persisted in the service sector. During the last quarter of 2025, the forecasts indicated that the UK was expected to face the worst inflation in the G7, but the Bank of England currently expects the headline to sink closer to the 2% target by the summer.

In the case of the European Central Bank, the inflation rate is already around 2%, but experts remain sceptical and believe that it wouldn’t be impossible for the inflation to start picking up speed again at some point during the year.

The consumers

What do all these complex factors mean for individual citizens, though? Stricter regulations, changing trade rules, and divided requests will rule markets in 2026. Growth is expected across Asia, which will support retail volumes overall, but there will be other hurdles to deal with as well. Most analysts believe that the majority of people will remain cautious about their consumption this year and will avoid large expenses unless absolutely necessary. Instead of spending freely, people are more likely to shop smartly and focus on value.

Some will most likely have to make do without discretionary items in order to cover the necessities such as utilities, rent, and groceries this year as well. Many consumers are better prepared, with many saying they make shopping lists before heading out, devise strategies to reduce impulsive spending, avoid in-the-moment purchases, and compare prices across brands before settling on a product.

Emotional caution continues due to the uncertainty people feel as a result of the lingering high prices. It’s natural for people to be psychologically guarded during times like these as a means of avoiding long-term stress in the future. More and more people describe their trust in a brand as very important, so companies will need to invest in quality and consistency if they wish to keep their consumers loyal.

While it may sound grim, it’s not all doom and gloom, as data shows that while most people are reducing their expenses, they are also indulging from time to time, especially when it comes to spending on experiences such as concerts or trips.

The global situation

Trade tensions have been consistently high over the last few months, and the uncertainty hasn’t vanished in 2026. The enduring issues will most likely cause further fragmentation over the next twelve months, forcing businesses to adapt and diversify in order to remain profitable. In the short term, the ones that are unable to do this will face severe losses and might even be ousted from the market altogether.

Over the long term, it is likely that these conditions will contribute to exceedingly low trade volumes that will also increase supply chain costs and potentially slow down economic trade all over the globe.

In conclusion, while the year’s economic landscape has shown to be promising in some key areas, it is important to remain careful. Whether you’re a business owner or a shopper, be careful with your spending and develop a strategy that can help you navigate these challenges.