Experts now predict that sales will grow more than previously anticipated due to tax reform and other positive economic factors, though the threat of tariffs may affect consumer confidence. 2018 retail sales are now projected to increase at a minimum of 4.5 percent over 2017, compared to the previous forecast of 3.8 to 4.4 percent.

“Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation’s consumer-driven economy,” says Matthew Shay, president and chief executive officer, NRF. “Tax reform and economic stimulus have created jobs and put more money in consumers’ pockets, and retailers see it in their bottom line. We knew this would be a good year, but the first half turned out to be even better than expected. However, a tremendous amount of uncertainty about the second half remains. It could be a banner year for the industry, or we could keep chugging along at the current rate.”

Retail sales increased by 4.8 percent in the first half of the year over year and have climbed 4.4 percent in the last three months, year over year. New projections estimate gross domestic product will grow to 2.5 to 3 percent. “We don’t want to see these economic gains derailed by protectionist trade policy,” says Shay. “With retailers ramping up imports and stocking their warehouses before most of the proposed tariffs will take effect, an immediate impact on prices on consumer goods is unlikely, but that won’t last for long. And just the mere talk of tariffs negatively impacts consumer and business confidence, leading to a decline in spending. It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them.”

Tariffs of 25 percent on $34 billion worth of Chinese goods took effect in July and are scheduled to take effect this month on another $16 billion. Both lists contain a small number of consumer products. Another set of tariffs on $200 billion in goods from China that would consist of a wide range of consumer items is currently under consideration and is expected to be concluded in September. Imports have been at high rates this summer as retailers bring merchandise into the country before the tariffs take effect, according to NRF’s Global Port Tracker report. “There are many factors that can impact our forecast, but our overall outlook is optimistic,” says Jack Kleinhenz, chief economist, NRF.

“Spending was weaker than expected at the beginning of the first quarter but has grown more rapidly since then, and we continue to anticipate strong sales during the second half of 2018.” “Despite this upgrade in our forecast, uncertainty surrounding the trade war and higher-than-expected inflation due in part to increased oil prices could make consumers cautious during the fall season,” says Kleinhenz.