The National Retail Federation forecasts that U.S. retail sales in 2021 will grow between 6.5 percent and 8.2 percent to more than $4.33 trillion, as more people get vaccinated and the economy reopens.
Online sales, which are included in the total, are expected to grow between 18 and 23 percent, to between $1.14 trillion and $1.19 trillion, according to the NRF.
“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,” NRF president and chief executive officer Matthew Shay said in a statement Wednesday.
High consumer savings rate, record-high stock valuations, increased home prices, enhanced government support, record low interest rates, and growth in jobs and wages were factors underpinning the bullish forecast.
However, as NRF’s chief economist Jack Kleinhenz said, “The trajectory of the economy is predicated on the effectiveness of the vaccine and its distribution. Our principal assumption is that that the vaccination will be effective and permits accelerated growth during the mid-year. The economy is expected to see its fastest growth in over two decades.”
Kleinhenz did acknowledge some slowing in retail momentum at the end of 2020. He also said that while retail sales have benefited from consumers shifting some spending away from services and experiences to goods, a shift in the reverse direction is anticipated this year, assuming a decline in coronavirus cases and the economy opening up. Services normally account for about 70 percent of consumer spending, but due to the health crisis, it dropped a couple of points in 2020.
Kleinhenz also said the NRF will be monitoring economic and spending patterns and shifts due to extenuating circumstances as the year progresses, to determine if adjustments in the forecast are warranted.
NRF’s 2021 forecast is wider than usual this year, because of all the uncertainties affecting retail performance.
Shay characterized the American consumer as “extremely resilient throughout the pandemic. We will continue to see that resilience and retailers behaving in agile, innovative ways to meet the needs of consumers.”
For 2020, early results show that retail sales grew 6.7 percent over 2019 to $4.06 trillion, nearly doubling NRF’s forecast of least 3.5 percent growth, which did not account for the impact of a global pandemic. That compares with 3.9 percent growth in 2019.
Online and other nonstore sales, which are included in the total figure, “skyrocketed” to 21.9 percent at $969.4 billion as consumers shifted to e-commerce, the NRF said. The numbers exclude automobile dealers, gasoline stations and restaurants. Retail sales have averaged just below 4.5 percent for the past five years.
According to the NRF, the 2020 holiday season (November through December) accounted for 19.4 percent of overall annual retail sales. The holiday retail sales grew an “unexpectedly high” 8 percent to $787.1 billion. Non-store and other online sales represented $206.9 billion of total holiday sales, up 22.6 percent over the year before.
NRF expects the overall economy to gain between 220,000 and 300,000 jobs a month in 2021, depending on the pace of the overall economy in the second and third quarters. Though the economy’s momentum stalled at the end of last year, NRF forecasts real GDP growth between 4.5 percent and 5 percent this year.
“Despite the challenges we all faced, and there have been far too many personal challenges over the past year, we continue to be optimistic in the aggregate,” said Shay. “Macro economic conditions are very healthy and will continue to improve, as we see an increasing number of vaccines administered and decreasing numbers of infection rates. We are optimistic the economy will experience its fastest growth in over two decades.”
“The consumer is going to have available at least a trillion dollars in accumulated savings,” said Kleinhenz. “We expect a pickup in job and wage growth in 2021. Personal income in terms of savings is 13.7 percent. Before the pandemic it was 7.3 to 7.5 percent.”
He also pointed out that the nation is seeing some price increases in the retail sector, due to excess demand and insufficient supply for certain goods. Macy’s, on Tuesday in its fourth-quarter report, cited difficulties getting enough furniture and mattresses from suppliers to meet the demand.