Retailing is in for a robust year, with sales seen rising 3.8 to 4.4 percent over 2017, according to the National Retail Federation.
Online and other non-store sales, which are included in the overall number, in 2018 are expected to increase between 10 and 12 percent, the NRF said on Thursday. The numbers exclude automobiles, gasoline stations and restaurants.
The bullish outlook is based on tax reform leading to higher wages and retailers investing in new technologies and services for customers, sustained consumer confidence, lower unemployment and momentum from the holiday 2017 season, which saw retail sales accelerating after a sluggish first half. Unemployment is expected to drop to 3.9 percent by the end of the year, from 4.1 percent currently. The overall economy is expected to gain an average of 163,000 jobs a month, down slightly from 2017 but consistent with labor market growth, the NRF said.
Gross domestic product growth is likely to be in the range of 2.5 to 3 percent.
For 2017 overall, retail sales grew 3.9 percent over 2016 to $3.53 trillion, according to the U.S. Census bureau’s preliminary estimate for the year. The number is subject to revision but exceeded NRF’s forecast for growth between 3.2 and 3.8 percent.
“The retail industry, while continuing to transform, is alive and well,” said Matthew Shay, president and chief executive officer of the National Retail Federation. “Tax reform passage is already starting to have an impact on retailers in terms of business strategies,” Shay said, citing Walmart and CVS among certain major retailers that decided to increase wages, extend bonuses or other benefits due to the sharp reduction in corporate taxes, from 35 to 21 percent.
The retail industry will have an estimated $175 billion in savings through tax cuts, according to the Wharton School of Business. “The diversity of the industry is going to reflect the diversity of the ways these investments are going to be made,” Shay said.
“Overall confidence in the economy remains high,” Shay said. Households have the capacity to take on more debt and there are more plentiful job opportunities, he added. “The psyche and general mind-set now is very, very positive. There’s lots of optimism building off the holiday season.”
“You can’t minimize the importance of confidence. A confident consumers is a confident spender,” said Jack Kleinhenz, NRF’s chief economist.
Savings being down “a little bit” suggests spending is up, Kleinhenz said. The anticipation of soon getting larger paychecks could be encouraging more shopping, he added.
“The push and pull of forces both external and internal to the U.S. economy will continue to provide challenges, but on balance we expect a good year,” Kleinhenz said. “And as the retail industry continues to transform, retailers will leverage the new tax plan to invest in their employees, stores and new formats that engage with the ever-evolving and demanding consumer.”