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NRF Says “State of the Economy is Sound”
and Retail Sales Will Grow Between
3.8 and 4.4%

Monday, February 11, 2019

The National Retail Federation (NRF) has forecast that retail sales during 2019 will increase between 3.8% and 4.4% to more than $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.”

Preliminary estimates show that retail sales during 2018 grew 4.6% over 2017 to $3.68 trillion, exceeding NRF’s forecast of at least 4.5% growth. The number includes online and other non-store sales, which were up 10.4% at $682.8 billion. 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. The numbers exclude automobile dealers, gasoline stations, and restaurants.

Growth of between 3.8% and 4.4% would result in total 2019 retail sales of between $3.82 trillion and $3.84 trillion. Based on growth of 10-12%, online sales would total between $751.1 billion and $764.8 billion, which are included in the total.

The 2018 results are based on 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.

“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.”

NRF expects the overall economy to gain an average of 170,000 jobs per month, down from 220,000 in 2018, and that unemployment – currently at 4% – will drop to 3.5% by the end of the year. 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, aluminum, and goods from China imposed in the past year. But tariffs could drive up the cost of consumer products and affect business direction and profits this year, particularly if tariffs on $200 billion in Chinese products rise from 10% to 25% as currently scheduled for March 1, he said.

It has been difficult to measure the impact of the recently ended government shutdown. 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 said. 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.

About NRF

The National Retail Federation is the world’s largest retail trade association. Based in Washington, D.C., NRF represents discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants, and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.

www.nrf.com

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