The National Retail Federation is forecasting that retail sales will rise 3.7 percent to 4.2 percent in 2017, matching or exceeding the 3.7 percent growth seen in 2016.
The overall numbers will be lifted by online and other non-store sales such as kiosks and catalogues, which are expected to increase between 8 and 12 percent, the NRF said.
“The economy is on firm ground as we head into 2017 and is expected to build on the momentum we saw late last year,” NRF president and chief executive officer Matthew Shay said. “With jobs and income growing and debt relatively low, the fundamentals are in place and the consumer is in the driver’s seat.
“But this year is unlike any other — while consumers have strength they haven’t had in the past, they will remain hesitant to spend until they have more certainty about policy changes on taxes, trade and other issues being debated in Congress,” he said. “Lawmakers should take note and stand firm against any policies, rules or regulations that would increase the cost of everyday goods for American consumers.
“Consumers are changed,” Shay added. “They are not the consumers we saw previous to the last recession. They need to be shown things are truly better and need a high confidence about the future….The overall sentiment and attitude of consumers and businesses have been rising, and on the upswing since the election. I think the question is whether that attitude gets married to the ability that businesses and consumers possess to make investment decisions.”
NRF’s optimistic forecast excludes automobiles, gasoline stations and restaurants. It also does not factor in potential policy changes coming out of Washington, D.C., revolving around trade, health care, tax reform, regulations and border taxes, a particularly thorny issue among retailers.
Shay said the border adjustment tax “would have the ultimate effect of raising prices for middle and working class Americans on virtually everything they purchase. This is an enormous and risky bet to make on the backs of consumers and taxpayers in this country and this is not the kind of bet we should be making.”
“Prospects for consumer spending are straightforward — more jobs and more income will result in more spending,” NRF chief economist Jack Kleinhenz said. “Regardless of sentiment, the pace of wage growth and job creation dictates spending. Our forecast represents a baseline for the year, but potential fiscal policy changes could impact consumers and the economy. It seems unlikely that businesses will notably increase investment until tax reform and trade policies are well-defined.
“It is clear that online sales will continue to expand in 2017 and provide growth for the retail industry,” Kleinhenz said. “But it is important to realize that virtually every major retailer sells online and many of those sales will be made by discount stores, department stores and other traditional retailers. Retailers sell to consumers, however, they want to buy, whether it’s in-store, online or mobile.”
Asked to outline which types of retailers would perform best, Kleinhenz said that in addition to online gains, he expects other trends of 2016 continuing this year — strength in home and home improvement retailers benefiting appliances and building materials; strength in food and beverage, and “bits and pieces” of apparel retailing performing well.
He said there will be continued pressure on electronics retailers due to lower pricing, and experts expect department and specialty stores that emphasize fashion will have another weak year, with the exception of most off-price and fast-fashion chains.
The NRF officials cited statistics showing that the labor market is in good shape with 5.2 million job openings around the country including 661,000 in retail. They also cited the resilient stock market, and the advancing housing sector with declining mortgage debt.
Unemployment is expected to drop to 4.6 percent by the end of the year, while economic growth is likely to be in the range of 1.9 to 2.4 percent, compared to last year’s less than 2 percent growth.
Retailing was weak in the first half of 2016 but rebounded in the third quarter and saw some momentum in the holiday season, which proved to be “a solid one,” Shay said.
“We remain very, very optimistic about the potential to really get our economy moving forward in a very robust way for the first time in a decade,” Shay said.
Shay did react to President Trump on Wednesday tweeting a criticism of Nordstrom for dropping his daughter Ivanka’s apparel line last week. “We are living in a world with a different kind of chief executive in the White House who communicates directly and forcibly and has strong opinions on the issues,” Shay said. “We have been encouraged. The president is a businessman, a retailer….He’s very much in touch with consumers.”
Last week, Nordstrom issued an internal memo in support of immigrants following Trump’s executive order temporarily barring immigrants from seven Muslim-majority countries. Nordstrom officials said dropping the Ivanka Trump line was based on how the collection performed and had nothing to do with the president’s stance on immigration.