The National Retail Federation has forecast retail sales of roughly $3.9 trillion this year, growing between 3.5% and 4.1%, despite uncertainty from lingering trade concerns, coronavirus and the presidential election.
Based on Thursday’s (Feb. 27) forecast, 2020 retail sales should total between $3.93 trillion and $3.95 trillion. Online sales, which are included in the total, are expected to grow between 12% and 15% to between $870.6 billion and $893.9 billion.
“The nation’s record-long economic expansion is continuing, and consumers remain the drivers of that expansion,” said NRF President and CEO Matthew Shay. “With gains in household income and wealth, lower interest rates and strong consumer confidence, we expect another healthy year ahead. There are always wild cards we cannot control like coronavirus and a politically charged election year. But when it comes to the fundamentals, our economy is sound and consumers continue to lead the way.”
Consumer spending was up in the fourth quarter of 2019, but was down in 2019 compared to 2018. Real GDP increased 2.3% in 2019 compared with an increase of 2.9% in 2018, according to the “second” estimate also released Thursday by the Bureau of Economic Analysis. The decline in real GDP in 2019 primarily reflected a slowdown in nonresidential fixed investment and consumer spending, which were partly offset by gains in both state and local and federal government spending. Imports increased less in 2019 than in 2018.
Current-dollar GDP increased 4.1%, or $846.9 billion, in 2019 to a level of $21.43 trillion, compared with an increase of 5.4%, or $1.060 trillion in 2018 (tables 1 and 3).
Preliminary results show that retail sales during 2019 grew 3.7% over 2018 to $3.79 trillion, just short of NRF’s forecast of 3.8% growth, which was based on incomplete data because of last year’s government shutdown. The total includes online and other non-store sales, which were up 12.9% at $777.3 billion, beating NRF’s forecast of up to 12% growth. The numbers exclude automobile dealers, gasoline stations and restaurants.
NRF expects the overall economy to gain between 150,000 and 170,000 jobs per month in 2020, compared with an average 175,000 in 2019, and unemployment – at 3.6% – should stay around 3.5%.
“The economy is growing at a more modest pace, but the underlying economic fundamentals remain in place and are positive,” said Jack Kleinhenz, NRF chief economist. “Consumers remain upbeat and have the confidence to spend, and the steady wage growth that has come with the strong job market is fueling their spending. The state of the consumer is very healthy.”
Kleinhenz cited unemployment that remains near a 50-year low and low interest rates that have spurred home buying and mortgage refinancing that should add to consumer spending on furniture and other home-related products. While disposable income has moderated recently, inflation has been low, and consumers have been confident enough to use their credit cards or savings to sustain their spending.
While consumers and small business owners are confident, Kleinhenz said corporate CEOs remain cautious over trade policy. Further progress to build on the phase one trade deal with China could boost the economy and accelerate corporate spending and hiring. Conversely, escalation of the trade war could discourage corporate investments. A potential wide range of potential policy outcomes associated with November’s elections could cause consumers and businesses to be cautious.
The forecast assumes coronavirus does not become a global pandemic, but business confidence and retail sales could be impacted if factory shutdowns in China continue, particularly if delivery of holiday season merchandise is affected.
Walmart, the nation’s largest retailer, said recently it expects consumer spending to remain strong in 2020 and it forecast top line sales growth of 3% with U.S. comp sales growth of 2.5% and U.S. e-commerce sales growth of 30%.