The National Retail Federation, the country’s largest retail trade association predicts retail sales grow by 6.5% to 8.2% to over $4.3 trillion. NRF is predicting that Americans will spend at record levels this year. The federation is pinning its optimism on expecting the strong rollout of Covid-19 vaccines. As a hope of decrease the infection rates, also as strong macroeconomic conditions that will support spending.
NRF Forecast Predict
The NRF tends to be perpetually upbeat about the potential for retail sales growth. NRF executives, said all indicators point to an unusually strong year.
“Consumers and the economy overall, in our view remain in very good shape despite the ongoing adversity that many communities are facing,” NRF President and CEO Matthew Shay gave his opinion in a conference call to discuss the results.
“We haven’t seen this kind of sales growth since 2004,” when sales grew by 6.3%, Shay said. “It’s been many, many years since we saw consumers engaged at this level and this would of course be an extraordinary outcome,” he said.
NRF is banking on a number of economic conditions with its prediction.
“Consumers have record-high levels of savings, they’ve paid down substantial amounts of debt, we see record high stock valuations, home prices continue to increase, and enhanced and continuing government support and record low interest rates,” Shay said. “All of those are shaping the economy and influencing the consumer and consumer behavior when it comes to spending and engaging in retail.”
Risk Factors
Risk factors that could derail the forecast include mutations of the virus that are resistant to the vaccines, said NRF Chief Economist Jack Kleinhenz. He called that scenario “a worst case, and not a very probable one”.
Kleinhenz said the NRF will be monitoring the economic data to make its forecast and will update its outlook accordingly as the year progresses.
Another possible risk factor is that retail sales are benefiting from the movement away from spending on services and experiences during the pandemic. Thus could hurt if spending shifts back to those areas.
The federation’s holiday 2020 sales forecast, some retail experts criticize it as being too optimistic, in fact, underestimate consumer spending in November and December.
The NRF had predicted holiday sales would increase by 3.6% to 5.2%. The actual increase was 8%, the highest holiday growth since 6.8% in 2004. The holiday 2020 growth was more than double the 3.5% average growth over the past five years.
For the full-year, 2020 retail sales grew 6.7% to $4.06 trillion. Online and non-store sales jumped by 21.9% for the year.
The NRF, in its forecasts and reports, relies on Census data that excludes categories such as restaurants, automobiles, and gasoline.
The holiday results exceeded the NRF forecast, Kleinhenz said, because holiday excitement overcame worries about the virus. “There was a certain amount of exuberance that people had,” he said. “They wanted to actually celebrate something after very hard and difficult months of being restricted.”
The stimulus legislation passed in late December. It created a pickup in spending in the last week of December into January, Kleinhenz said.
NRF CEO Shay acknowledged that not all retail segments had a great 2020. But even many of those retailers have told him they fared better than expected, he said as Forbes states.
