Feb 07, 2019

NRF Says State of the US Economy is Sound and Forecasts Retail Sales Growth of Between 3.8% to 4.4% in 2019

The National Retail Federation (NRF) of the United States of America (USA) released a statement forecasting that retail sales during 2019 will increase between 3.8% and 4.4% to more than US$ 3.8 trillion “despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown”.

“We believe the underlying state of the economy is sound,” NRF President and CEO Matthew Shay said. “More people are working, they’re making more money, their taxes are lower and their confidence remains high. The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds. It’s time for artificial problems like trade wars and shutdowns to end, and to focus on prosperity not politics.”

NRF’s preliminary estimates reveal that in 2018, retail sales increased 4.6% over 2017 to touch US$ 3.68 trillion. This exceeded NRF’s forecast of at least 4.5% growth. “The number includes online and other non-store sales, which were up 10.4% at US$ 682.8 billion,” NRF said. “That met NRF’s forecast of 10% - 12% online growth, and online is expected to grow in the same 10% - 12% range again this year.”  (These numbers exclude automobile dealers, gasoline stations and restaurants.)

A growth of between 3.8% to 4.4% for 2019 would amount to total retail sales going up to between US$ 3.82 trillion to US$ 3.84 trillion. NRF estimates that, based on a growth of 10-12%, online sales would total between US$ 751.1 billion and US$ 764.8 billion, which are included in the total.

NRF noted that the 2018 results are based on US Commerce Department data up through November, but include NRF estimates for December because the agency was closed during the recent government shutdown and has not yet released December figures. “The results are subject to revision once December numbers become available, and government numbers are revised again each spring regardless of the shutdown,” NRF said.

“We are not seeing any deterioration in the financial health of the consumer,” NRF Chief Economist Jack Kleinhenz said. “Consumers are in better shape than any time in the last few years. Most important for the year ahead will be the ongoing strength in the job market, which will support the consumer income and spending that are both key drivers of the economy. The bottom line is that the economy is in a good place despite the ups and downs of the stock market and other uncertainties. Growth remains solid.”

Looking at the employment data, NRF expects the overall economy to gain an average of 170,000 jobs per month, down from 220,000 in 2018. It estimates that unemployment – currently at 4% – will drop to 3.5%  by the end of the year.

NRF says gross domestic product is likely to grow about 2.5% over 2018. Kleinhenz said inflation and interest rates are expected to remain low this year and that retail sales have been helped by recent reductions in gasoline prices.

“Retailers so far have been able to largely mitigate the impact of new tariffs on steel, aluminium and goods from China imposed in the past year,” Kleinhenz said.  “But tariffs could drive up the cost of consumer products and affect business direction and profits this year, particularly if tariffs on US$ 200 billion in Chinese products rise from 10% to 25% as currently scheduled for March 1.”

NRF asserted that measuring the impact of the recently ended government shutdown has been difficult. Government workers will be paid retroactively but some spending and expenses such as dining out or entertaining have been lost and government contractors will not receive back pay, Kleinhenz pointed out. “A key issue is how quickly the Internal Revenue Service will be able to process a potential backlog of tax returns, which would affect first-quarter spending,” he said.