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Retail Forecast Positive for 2019

Retail sales in 2019 are expected to increase between 3.8 percent and 4.4 percent to more than $3.8 trillion despite political and economic factors including the trade war, the changing stock market and the effects of the government shutdown, according to the National Retail Federation.

The findings exclude automobile dealers, gasoline stations and restaurants. “We believe the underlying state of the economy is sound,” says Matthew Shay, president and chief executive officer, NRF. “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.”

Initial estimates show that retail sales in 2018 increased 4.6 percent from 2017 to reach $3.68 trillion, exceeding the NRF’s prediction of at least 4.5 percent growth. The number includes both online and other non-store sales, which grew 10.4 percent to $682.8 billion. The numbers align with the NRF’s forecast of 10 to 12 percent online growth. Online sales are expected to grow in the same 10 to 12 percent range in 2019. An increase of 3.8 percent to 4.4 percent would result in total 2019 retail sales between $3.82 trillion and $3.84 trillion. A 10-to-12 percent increase in online sales would add up to sales between $751.1 billion to $764.8 billion, which are included in the total. “We are not seeing any deterioration in the financial health of the consumer,” says Jack Kleinhenz, chief economist, NRF. “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.”

The NRF forecasts that the overall economy will gain an average of 170,000 jobs per month, a downturn from 220,000 in 2018. The unemployment rate, which is currently at 4 percent, is expected to drop to 3.5 percent by the end of the year. Gross domestic is expected to grow about 2.5 percent, compared to 2018. Kleinhenz suggests that inflation and interest rates will remain low this year and that recent reductions in gasoline prices have bolstered retail sales. Retailers have been able to lessen new tariffs on steel, aluminum and goods from China imposed in the past year. However, tariffs may raise the cost of consumer products and affect business decisions and profits this year, mainly if tariffs on $200 billion in Chinese products grow from 10 percent to 25 percent, as scheduled for March 1.

The impact of the recent government shutdown has not been adequately measured. Government workers will be paid retroactively, but some spending and expenses, such as eating out or entertaining, have been hurt. Government contractors will not receive back pay, says Kleinhenz. The speed at which the Internal Revenue Service handles the backlog of tax returns will affect Q1 spending. The 2018 results are based on Commerce Department findings collected through November 2018 and include NRF estimates for December because the agency was closed during the recent government shutdown. Actual December figures will be released soon, which will affect final 2018 results.

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