NRF calls for 4.1 percent gain in 2014 retail sales
February 10, 2014
Even with tangible signs of an improving economy, it still stands to reason that consumer spending-which represents roughly two-thirds of all economic activity-remains the linchpin of GDP growth, which happens to have shown decent gains over the last two reported quarters.
That said, the level of retail spending and related expectations is closely followed and analyzed by many. But perhaps the most telling is the National Retail Federation’s (NRF) annual economic forecast for 2014.
The NRF said last week that it expects 2014 retail sales, not including automobiles, gas stations, and restaurants, to head up 4.1 percent compared to 2013, which is ahead of the preliminary 2013 increase of 3.7 percent over 2012. And it also said that the fervent pace of e-commerce activity will continue, with a projected 9-to-12 percent increase in online sales.
“We are looking forward to an even better year this year for retailers than we saw last year,” said NRF President and CEO Matthew Shay on a conference call last week. “Based on same-store comparable numbers, it is pretty clear that the severe weather that impacted many parts of the country had an impact on [comp] sales, as well as aggressive promotion and discounting that took place throughout the entire holiday season. From Black Friday forward, we knew things would be very promotional, with a great deal of opportunities to take advantage of promotions.”
As for 2014, retail sales expectations, Shay said this puts things on the right trajectory, with continued modest and incremental growth in the cards. He added that the expected 9-to-12 percent gain in online sales is in line with the NRF’s preliminary estimate of 10-to-13 percent.
2014 is also expected to better in terms of overall retail sales due to what Shay described as less volatility that was replete in 2013, with things like: the Fiscal Cliff and consumers and investors faced with the single largest tax increase in history, which hurt sales and consumer confidence; rising gasoline prices last spring; issues related to the imperfect rollout of the federal health care law; the federal budget sequester; and the government shutdown in mid-October.
Even with these myriad issues, Shay said that the 2013 holiday retail season finished on a strong note and with those volatile issues of 2013 in the past, the economy is seeing incremental growth going forward with positive expectations in 2014 with retailers and their customers in a good place.
NRF Chief Economist Jack Kleinhenz said that 2013 was a challenging year for retailers and consumers alike, concluding with what he called one of the most interesting holiday seasons on record.
“There were a lot of conflicting views about the U.S. economy and holiday shopping, with reports of weak sales and a weak economy actually was met with much stronger demand and very strong economic indicators as we have seen for GDP in the third and fourth quarter,” he explained. “I don’t think 2014 is going to be any less challenging, although I do believe that growth will be a little faster and there will me more overall strength in the economy and retail sales.”
What’s more, Kleinhenz said the three-month moving average for retail sales for the last three months of 2013 topped 2012 by 3 percent and 2011 by 3.8 percent.
NRF officials have said repeatedly that retailers have been creative in the past in addressing uncertainties in the market while delivering customer value, which is reflected in their supply chain management practices by getting better control over their inventories and getting the right mix of products and goods delivered to best meet consumers’ needs.
Shay said that supply chain efficiency is one of retailers’ competitive advantages that improves performance and separates them from the competition. And the way in which consumers embraced mobile technology and became more confident in waiting until the last minute to make purchases is going to drive some interesting discussions about the supply chain and the relationship between retailers and their partners and how to best handle delivery of products, which is likely to be an even bigger part of the 2014 holiday season.
The NRF cited various factors within its 2014 economic forecast, including:
-economic growth is expected to be above its long-term historical average. Early estimates for growth in the economy as measured by real GDP could fall between 2.6 and 3 percent, a noticeable improvement from the estimated 1.9 percent rate for 2013, and the fastest pace in the past three years;
-the labor market is expected to continue its modest recovery averaging approximately 185,000 jobs per month, helping decrease unemployment to near 6.5 percent or lower by the end of 2014
-inflation as measured by the CPI is predicted to inch higher to as much as 1.7 percent in 2014; and
-the housing sector is expected to continue to improve in 2014, and stronger household and business confidence should spur more consumer spending overall
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