The National Retail Federation released Wednesday (Feb. 24) an estimate for retail sales growth this year as the COVID-19 vaccine continues to be rolled out. At $4.33 trillion, the forecast predicts sales to grow between 6.5% and 8.2%, the trade group said.
“Despite the continuing health and economic challenges COVID-19 presents, we are very optimistic that healthy consumer fundamentals, pent-up demand and widespread distribution of the vaccine will generate increased economic growth, retail sales and consumer spending,” said NRF CEO Matthew Shay. “From the outset of the pandemic, retailers have gone above and beyond even the most conservative safety guidelines to protect and serve their associates and consumers alike. Retailers are increasingly engaged in working with federal, state and local health officials to distribute and administer the vaccine. This partnership has been key to our economic health throughout the pandemic and will continue this year.”
The optimism is also based on early results that show better-than-expected retail sales last year of $4.06 trillion, up 6.7% from the prior year and almost twice the 3.5% growth the trade had forecasted. This figure compares with 3.9% growth in 2019. Online and other non-store sales, which are included in the total figure, skyrocketed to 21.9% at $969.4 billion as consumers shifted to ecommerce. The numbers exclude automobile dealers, gasoline stations and restaurants, NRF notes.
The strong holiday season accounted for 19.4% of overall annual retail sales. Retail sales through November and December grew an unexpected 8% to $787.1 billion. Online sales represented $206.9 billion of the total holiday sales. Online sales rose 22.6% from the prior year. Online retail sales are expected to be roughly 20% or $1.1 trillion of the $4.3 trillion to $4.4 trillion forecast for this year by the trade group.
“The trajectory of the economy is predicated on the effectiveness of the vaccine and its distribution,” said NRF Chief Economist Jack Kleinhenz. “Our principal assumption is that the vaccination will be effective and permits accelerated growth during the mid-year. The economy is expected to see its fastest growth in over two decades.”
Kleinhenz said this year marks the second year of savings, record high stock valuations, increased home prices, enhanced government support and record low interest rates, which are all contributing factors towards the economy and consumer spending behavior. He said households will still consume retail goods but will turn to services as they are able, which normally account for 70% of consumer spending. While the pandemic has precipitated broader adoption of multichannel services for the retail industry, households are becoming attached to the convenience and product selection of buying online.
NRF expects the overall economy to gain between 220,000 and 300,000 jobs per month in 2021, depending on the pace of the overall economy in the second and third quarters. Despite the economy’s stalled momentum at the end of last year, NRF forecasts real GDP growth between 4.5% and 5.%.