New Delhi [India], November 22 (ANI): The global fashion industry is set to face a 'challenging' year in 2026, as most executives brace for worsening conditions amid economic uncertainty, shifting trade dynamics, and unpredictable consumer behaviour, according to the BoF-McKinsey State of Fashion 2026 report.

The report shows that 46 per cent of fashion executives expect conditions to deteriorate in 2026, up eight percentage points from the previous year, while only 25 per cent foresee improvement. The sentiment marks a shift from earlier years when 'uncertainty' dominated forecasts. Now, 'challenging' has become the single word defining the sector's outlook, as per the report.

Consumer confidence remains the biggest concern, with nearly eight in ten leaders citing weak spending appetite as the top risk to growth. This is closely tied to ongoing geopolitical instability and inflationary pressures that continue to dampen purchasing power, especially in the United States, where the consumer confidence index hit its lowest point since 2020.

Disrupted trade flows are also adding to industry anxiety. Around 40 per cent of executives identify deglobalisation and tariffs as major risks, up sharply from the previous year. North America, in particular, is viewed as the least promising region, with 36 per cent of respondents labelling it 'unpromising or very unpromising.'

The BoF-McKinsey forecast suggests that the fashion industry will post only low single-digit growth in 2026, weighed down by volatile macroeconomic conditions. To offset rising input costs, nearly three-quarters of executives plan to raise prices, with North American companies leading the pack, 45 per cent intend to hike prices by more than 5 per cent.

As costs climb, companies are shifting their focus toward improving efficiency. While 69 per cent of leaders still prioritise sales growth, this figure has declined from 73 per cent a year earlier, signalling growing attention to cost control and productivity gains.

One key strategy emerging from the report is the integration of artificial intelligence across operations. Executives identify scaling AI and digital tools as the biggest opportunity for 2026. After limited experiments in areas like customer service and design, fashion leaders are now seeking to embed AI more deeply into their business models, from supply chain management to creative design.

The report also highlights a renewed focus on sustainability and differentiation. Executives view circular business models such as resale as ways to meet consumer expectations while maintaining relevance in an increasingly value-conscious market.

The mid-tier brands that balance creativity, affordability, and experience are expected to outperform luxury players, who continue to grapple with high prices and slower demand. (ANI)