NEW YORK (AP) — The National Retail Federation, the nation’s largest retail trade group, is forecasting annual retail sales will grow at a faster clip this year than last year, citing consumers’ resilience despite lots of economic volatility.

But the group said Wednesday that the repercussions of the Iran war on consumer spending are too uncertain to incorporate into its outlook.

The National Retail Federation expects retail sales should rise this year by 4.4% over 2025 to $5.6 trillion, based on a new model developed in partnership with Oxford Economics, an independent economic advisory firm. In 2025, retail sales increased by 3.9% compared with the previous year, the group said.

The 2026 sales forecast exceeds the 3.6% average annual sales growth over the past 10 years, excluding the pandemic period from 2020 to 2022 when sales growth was outsized.

The forecast excludes sales from auto dealers, gas stations and restaurants.

“The U.S. economy was a bit up and down in 2025,” Mark Mathews, chief economist of the National Retail Federation, said. “However, the one bright spot through these ups and downs was the consumer whose continued spending was a key economic driver in 2025. We expect this strength to continue in 2026.”

Mathews noted that NRF is monitoring the Iran war, which is sending oil and gas prices up. Oil prices have surged nearly 50% since the Iran war began, and gasoline prices are following close behind. But Mathews said the forecast could be revised in coming months if the war starts impacting retail sales.

There are clear warning signs of more challenges to come. On Wednesday, the Labor Department reported that U.S. wholesale prices came in at 3.4% in February — hotter than expected — driven partly by a sharp increase in food costs. The price gains happened before the U.S. and Israel attack on Iran pushed energy prices sharply higher.

NRF’s solid sales forecast comes as consumers’ mood has been downbeat, but the group noted that sentiment has been historically disconnected from actual spending. What underpins spending has been wage growth, household balance sheets and a solid employment market, NRF officials said.

The trade group noted that labor market conditions are expected to weaken, but they believe the unemployment rate should remain below 4.5% this year.

Mathews added that the spending outlook is still bifurcated between higher- and lower-income consumers, with higher-income households driving the majority of growth in spending across the retail spectrum.