The National Retail Federation forecasts that retail sales will grow between 6.5% and 8.2% to more than $4.33 trillion in 2021 as more people get vaccinated and the economy reopens.
NRF said retail sales in 2020 grew 6.7% over 2019 to $4.06 trillion, nearly doubling its forecast of at least 3.5% growth, which did not account for the impact of the pandemic.
This compares with 3.9% growth in 2019, and broke the previous record of 6.3% that was set in 2004.
The 2020 November-December holiday season accounted for nearly one-fifth (19.4%) of overall annual retail sales. Retail sales during this period grew an unexpectedly high rate of 8% to $787.1 billion.
NRF estimates that retail sales this year will total between $4.33 trillion and $4.4 trillion. Online sales (which are included in the total) are expected to grow between 18% and 23% to between $1.14 trillion and $1.19 trillion.
“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 President Matthew Shay.
A wide array of economic indicators point toward potentially record retail sales growth during 2021, but the coronavirus pandemic remains the biggest challenge for the year, according to NRF Chief Economist Jack Kleinhenz.
“There is no doubt the economy is positioned for growth in 2021, but how much growth comes down to a single non-economic force – the coronavirus.”
He added, “I am optimistic about improving macroeconomic conditions as Covid 19 infections decline and distribution of vaccines becomes more widespread. Yet the road is never straight, and we have challenges ahead. The pandemic remains the largest uncertainty and the biggest risk the economy faces in 2021.”
Despite the pandemic, NRF sees the economy entering its second year of strong savings, high stock values, increased home prices, enhanced government support and record-low interest rates.
The federation also says employment and wages will continue to grow, and consumers will have plenty of purchasing power that, when combined with pent-up demand, are expected to fuel growth.
Online and other non-store sales, which are included in the total retail sales forecast, are seen improving because many consumers who had not tried ecommerce before the pandemic are likely to continue shopping online, Kleinhenz observed.
Largely because of Covid 19’s negative impact on travel, go out to dinner or attend entertainment and sporting events, 2020 saw a shift toward spending on goods rather than services, which normally make up 70% of consumer spending.
Kleinhenz expects retail to continue to benefit from that shift, but some pre-Covid services spending will return, particularly among affluent households, who spend more on services and are likely to resume those activities once it is safe to do so.
NRF expects to reach its spending forecast regardless of whether Congress passes the $1.9 trillion stimulus package, but Kleinhenz it could provide an additional boost to consumer spending.
While the pace of growth could be “patchy” across the country given differences in demographics, industrial base and state or local government policies, Kleinhenz says there should be a “return to normalcy” beginning in the second quarter.
NRF’s numbers do not include restaurant, automobile and gas station consumer sales.
