NEW YORK — The National Retail Federation dropped its 2003 forecast for retail sales down to 3.8 percent growth, from 5.6 percent predicted in January, due to the war with Iraq.
The revised outlook is based on total sales expected from general merchandisers, apparel stores, furniture and home furnishings stores, electronics and appliances stores, and sporting goods, hobby, book and music stores. It’s a broad category known as GAFS.
On Tuesday, NRF chief economist Rosalind Wells said in a statement, “The Iraqi conflict is hindering decisions made by businesses and consumers. Not only are businesses taking a wait-and-see approach before making major financial commitments, they are reluctant to conduct business as usual, holding back hiring and causing layoffs of others.”
In addition, consumers have been affected by the escalating price of crude oil. “Consumers have had to dig deeper into their pocketbooks to pay for home heating bills and run their cars,” Wells said. “As a result, disposable income has decreased and retail sales have suffered.”
According to recent estimates, every penny increase at the gas pump means the economy loses $1 billion in consumer spending elsewhere.
However, Wells said spending should significantly improve in the second half of the year, once the Iraq conflict is resolved.
“Assuming a positive war outcome, consumer confidence should increase. Employment and income gains will increase. Oil prices will subside. The stock market will probably reflect better times ahead. And a return to more robust consumer spending should follow,” Wells said. “Once again, all eyes are on the consumer to lead the economy to higher ground.”
NRF projects first-quarter GAFS sales to increase slightly more than 2 percent. Second-quarter sales are forecast to increase 2.5 percent; third-quarter sales, 4.7 percent, and fourth-quarter sales, 5.3 percent.