Looking forward to 2026, the phrase most steadily used to explain anticipated situations in the trend trade is “challenging,” surpassing “uncertainty” which was commonest in 2024 and 2025.
As a outcome, the trade outlook for 2026 stays usually downbeat. Forty-six % of executives count on trade situations to worsen, a rise of 8 share factors over the earlier yr. However, expectations have additionally turn out to be extra polarised, as 25 % additionally foresee trade situations enhancing — a 5 share level improve.
Overall, the key causes for concern stay broadly in line with final yr — almost eight in 10 executives cite shopper confidence and urge for food to spend as the high danger to trade development. This is intently tied to geopolitical instability, with broader macroeconomic situations persevering with to make shopper behaviour extra unpredictable.
More so than in earlier years, disrupted commerce flows and deglobalisation are weighing closely on executives as they look forward to 2026. Forty % of leaders cite this as certainly one of their high three dangers (up 25 share factors from final yr), largely pushed by new tariffs which can be reshaping provide chains and elevating enter prices.
Industry development is anticipated to stay low as macroeconomic uncertainty persists
McKinsey’s Fashion Growth Forecasts predict the world trend trade will as soon as once more put up low single-digit development in 2026. Heightened macroeconomic volatility is anticipated to proceed to weigh on sentiment and drive value-conscious shopper behaviour. Consumer sentiment has been particularly challenged in the US in 2025. In April, the shopper confidence index hit its lowest degree since May 2020 amid tariff bulletins, with total US trade development anticipated to fall in need of final yr’s forecast for 2025.
The luxurious phase is projected to see modest enhancements throughout markets after a troublesome 2025, supported by a flurry of artistic resets trend leaders hope will inject pleasure into the trade.
Growth drivers will range by area for trend and luxurious in 2026
Looking forward to 2026, luxurious is about to outperform trend in all main markets, supported by resilient high-net-worth demand, journey retail restoration and selective model funding, whereas trend development stays constrained by cautious customers, inflationary stress and muted sentiment. Regional macroeconomic situations, wealth results and class combine will play a decisive function in shaping efficiency throughout Europe, the US and China.
Europe: +1.4% GDP development (2026E)
The trend market in Europe is anticipated to develop by 1 to 2 % in 2026.
- GDP development is anticipated to stay regular in 2026, underpinned by a resilient labour market with secure unemployment charges.
- Disposable incomes are anticipated to develop barely quicker than 2025, with inflation easing from 3.3 % to 2.5 %.
- Consumers are anticipated to stay cautious, with over 60 % of customers planning to commerce down in This autumn 2025.
The luxurious market in Europe is anticipated to develop by 1 to three % in 2026.
- Duty-free spending is anticipated to develop in key markets (up greater than 3percentpoints in France, Italy and Spain) after 2025 spend was dampened by the US greenback’s decline in opposition to the euro.
- Domestic demand stays sturdy, with manufacturers like Hermès, Richemont and LVMH reporting sturdy gross sales from native consumers in H1 2025.
US: +2.1% GDP development (2026E)
The trend market in the US is anticipated to develop by 1 to three % in 2026.
- The first full yr of tariffs is about to accentuate worth pressures relative to 2025, with rising costs the high concern for US customers.
- After a slowdown in GDP development and an almost-four-year unemployment excessive in August 2025, GDP development is about to remain low in 2026. Uncertainty stays round additional Fed price cuts.
- Consumer sentiment remains to be cautious, with confidence down by 3.6percentpoints in September 2025 and ongoing uncertainty anticipated to weigh on sentiment into 2026.
The luxurious market in the US is anticipated to develop by 2 to 4 % in 2026.
- Equity market momentum continues to gas wealth creation. The variety of ultra-high-net-worth (UHNW) Americans rose 6.5 % in H1 2025, following a 21 % surge in 2024.
- While financial volatility and excessive costs curbed 2025 spend from aspirational patrons, artistic resets might reignite demand.
- Brands are investing in the US luxurious market, with retail sq. footage rising 65 % in H1 2025, in contrast with a decline the yr prior, reflecting efforts to revive development.
China: +4.2% GDP development (2026E)
The trend market in China is anticipated to develop by 1 to three % in 2026.
- GDP development is projected to sluggish in 2026, with disposable revenue development additionally anticipated to fall beneath 2024 and 2025 ranges.
- With the actual property market nonetheless weighing on sentiment, shopper confidence stays subdued and saving charges elevated.
- Category efficiency is combined: Sportswear gross sales are up 9 % in 2025 pushed by casualisation and deal with well being and wellbeing, whereas the wider attire market stays muted.
The luxurious market in China is anticipated to develop by 2 to 4 % in 2026.
- Domestic spend is about to rise modestly as prosperous households are anticipated to develop 6 % by way of 2027, whereas development in outbound journey to key markets is anticipated to sluggish.
- UHNW shopper web intent to spend on luxurious trend in 2026 is 34 % in China versus 27 % on common in markets.
- Movements in the actual property or fairness market stay an necessary issue influencing outcomes.
Fashion executives count on to extend costs greater than final yr
In 2026, almost three-quarters of executives count on to boost costs — a 19 share level improve from 2025. In the trend phase, 26 % plan to extend costs by greater than 5 %, in contrast with 18 % in the luxurious phase, the place development has largely been price-driven in latest years. Regionally, North American executives count on to extend costs the most, with 45 % planning to boost them by greater than 5 % in an effort to offset tariff-driven enter price will increase.
Reflecting this, almost one-quarter of executives in North America anticipate their price of products bought (COGS) will improve by greater than 9 %. Expectations of price will increase stay elevated throughout areas: Excluding North America, 11 % of executives anticipate COGS to extend by greater than 9 %, in comparison with simply 3 % in 2025.
As these pressures persist, executives are focussing extra on effectivity. In 2026, 69 % plan to prioritise gross sales development over price enhancements, down from 73 % in the earlier yr. While top-line development stays a key focus, the rising emphasis on price administration underscores recognition of upper prices and the want to enhance productiveness to guard margins.
Leaders say AI and digital instruments will current the greatest alternative for the trade in 2026
Using AI to handle price pressures and future-proof development: Executives establish scaling AI and associated digital capabilities as the single greatest alternative for 2026. To date, most functions have centered on siloed duties comparable to copywriting, picture technology and customer support. However, leaders are actually trying to combine AI throughout their companies. The trend trade has traditionally trailed different sectors in adopting AI, highlighting the want for the proper organisational construction and abilities to seize the full potential of AI-driven innovation.
Keeping differentiation entrance of thoughts: Executives proceed to stress the want for a particular worth proposition rooted in creativity and innovation. Given issues round the unpredictability of shopper behaviour, this displays an crucial for manufacturers to distinguish to drive relevance.
Integrating sustainability into the enterprise mannequin: Executives are as soon as once more trying to sustainable practices as a chance to enhance operations and meet shopper expectations. Circular approaches, together with resale, have been highlighted as areas the place executives see potential to create worth.
Navigating financial uncertainty: Executives now not take into account improved financial situations in key markets amongst their high alternatives. Instead, leaders are focussing on constructing better resilience by way of enhancing their very own enterprise operations and differentiating their choices.
The 10 trend trade themes that may set the agenda in 2026:
1. Tariff Turbulence
US tariffs are reshaping world commerce as larger duties push up prices throughout the worth chain, closely impacting trend. Brands are making worth modifications, shifting sourcing and enhancing effectivity in a bid to counteract the impression. Larger suppliers are pursuing footprint optimisation, digitisation and automation, whereas smaller gamers face mounting stress. Agility might be the defining issue enabling manufacturers and suppliers to take care of their aggressive edge.
2. Workforce Rewired
Technology is reshaping workforces globally. Artificial intelligence investments are set to drive productiveness, that means some current positions will turn out to be AI-centric and new roles will emerge. Fashion leaders should prioritise upskilling their workforces and buying new expertise to remain aggressive. Strong change administration might be essential to seize AI’s full potential.
3. The AI Shopper
Artificial intelligence is already disrupting how customers uncover trend. In the years forward, autonomous AI buying brokers might even act on their behalf, finishing duties from monitoring costs to purchasing merchandise. To guarantee their merchandise are seen — and favoured by — AI fashions, manufacturers should rethink their digital advertising and e-commerce infrastructure, the place semantically wealthy knowledge and API-accessible content material might be essential to success.
4. Jewellery Sparkles
With unit gross sales development outpacing all different trend classes, jewelry’s shiny second is about to proceed into 2026. Having defied the broader luxurious slowdown, the class will maintain reaping the rewards of a rising buyer base with a need for long-lasting investments, self-expression and treating themselves. As jewelry cements its function as equipment centrepiece, trend gamers will search to seize their share of the class’s outsized development.
5. Smart Frames
Style-conscious units geared up with multi-modal AI are set to redefine the wearables panorama in 2026, with good eyewear rising as a number one format. Major gamers have already got product launches scheduled, reflecting sturdy market momentum. With the class projected to exceed $30 billion by 2030, manufacturers have a well timed alternative to accomplice with expertise leaders to unlock high-value shopper use instances and speed up adoption.
6. The Wellbeing Era
Wellbeing is changing into central to how customers stay, spend and outline themselves. As they tire of attention-grabbing content material, they’re drawn to manufacturers that replicate their shifting identities and provide them emotional connections. Fashion manufacturers are responding by coming into wellbeing-adjacent “third spaces,” however additional alternative lies in integrating these shifting priorities extra holistically throughout the model universe.
7. Efficiency Unlocked
In a difficult trend market, firms should turn out to be extra environment friendly to drive development. Old benefits like scale and low-cost sourcing are now not enough to maintain a wholesome financial mannequin. By profiting from new expertise, companies can enhance productiveness to cut back prices, unlocking sources to speculate in differentiators that allow development.
8. Resale Sprint
Customers are spending extra on secondhand trend in the seek for worth as costs proceed to rise in the main market. Marketplaces have made buying secondhand mainstream, however manufacturers should now outline resale methods of their very own. While operational hurdles stay, the lure of untapped income will make resale an more and more engaging option to bolster enterprise fashions and model notion.
9. The Elevation Game
From the worth phase as much as reasonably priced luxurious, trend manufacturers are transferring upmarket. Some need to differentiate from ultra-low-cost opponents, whereas others intention to seize the former high-end shopper squeezed out by luxurious costs. With margins below stress and competitors intensifying in 2026, these elevation methods will acquire new urgency. Product high quality and standout experiences might assist manufacturers improve their positioning.
10. Luxury Recalibrated
The luxurious slowdown is prompting a part of strategic renewal. Brands are decreasing their reliance on price-led development and refocussing on creativity and craftsmanship to rebuild consumer belief. This recalibration requires manufacturers to steadiness the wants of distinct buyer segments and combine product, storytelling and consumer expertise right into a cohesive expression of name worth.
This article first appeared in The State of Fashion 2026, an in-depth report on the world trend trade, co-published by BoF and McKinsey & Company.