The National Retail Federation forecasts that retail sales during 2020 will increase somewhere between 3.5% and 4.1% to more than $3.9 trillion despite uncertainty created by the lingering trade war, the coronavirus and the presidential election.
“The nation’s record-long economic expansion is continuing, and consumers remain the drivers of that expansion,” NRF President Matthew Shay said.
“With gains in household income and wealth, lower interest rates and strong consumer confidence, we expect another healthy year ahead,” he added.
“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.”
Shay’s remarks came before news stories about the exponential growth of the Coronavirus across the globe along with the extent of its economic impact.
Preliminary results for 2019 show that retail sales grew 3.7% over 2018 to $3.79 trillion, just short of NRF’s forecast of at least 3.8% growth, which had to be based on incomplete data because of last year’s federal 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. Other experts predict that ecommerce — currently representing 11% of total retail sales – will grow to as much as 30% over the next few years.
Based on NRF’s forecast, 2020 retail sales are expected to 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.
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. It believes unemployment – currently at 3.6% – should stay around 3.5%, and Gross domestic product will grow 1.9%, down from preliminary estimates of 2.3% in 2019.
“The economy is growing at a more modest pace, but the underlying economic fundamentals remain in place and are positive,” NRF Chief Economist Jack Kleinhenz said.
“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,” he added.
Kleinhenz noted that unemployment remains near a 50-year low. He added thatd low interest rates have spurred home buying and mortgage refinancing that should add to consumer spending on furniture and other home-related products. (This was before the Fed slashed rates further).
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, corporate CEOs remain cautious over trade policy, he says, adding that further progress on a China trade agreement could boost the economy and accelerate corporate spending and hiring. Conversely, escalation of the trade war could discourage corporate investments.
Kleinhenz also says the potential policy outcomes associated with November’s elections could make consumers and businesses more cautious.
The forecast assumes that 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