Retail sales projections inch up for the second half of the year

More often than not, the lion’s share of economic activity in the United States stems from consumer purchases, which comprise roughly two-thirds of domestic economic output.

That said, most anything and everything related to consumer spending is closely scrutinized and tracked, whether it be automotive and housing sales, and things more related to day-to-day consumer spending like department stores, big-box retailers, and e-commerce-related shopping, among things, as well. It also goes without saying that retail sales activity is closely monitored by supply chain stakeholders top determine things like volume trends according to seasonality and other things related to strategy such as asset allocation for motor carriers, railroads, and intermodal service providers, and also more forward-looking things like site selection for 3PL’s and warehousing and distribution types.

In short, when it comes to retail sales-related news and data, it is something that holds the ear of basically all supply chain stakeholders.

That is why it was interesting to see last week’s data issued by the National Retail Federation (NRF), in which the organization lowered its 2014 retail sales forecast, due to a slow first six months of the year (and largely negatively influenced by the terrible winter weather), but noting that retail sales are expected to be strong over the next five months to finish the year.

Looking at the numbers the total 2014 retail sales figure was dropped from an anticipated 2014 annual gain of 4.1 percent over 2013 to a 3.6 percent estimate. And for the first half of 2014, NRF said that retail sales were up just 2.9 percent compared to the first six months of 2013, with sales through the end of the year expected to be up 3.9 percent annually.

In a blog posting, NRF Chief Economist Jack Kleinhenz wrote that first quarter economic growth was weaker than expected due partly to poor weather and compared with what was reported at the end of 2013, real estate, inventories and exports were all weaker in the first quarter, which, in turn dragged down progression and growth expectations. And with that as a backdrop, he explained it is reasonable to expect modest growth for the near future, with no expectations for the economy to come “roaring back,” and “further improvement in growth will likely continue at a modest to moderate rate.”

While this news could be viewed as lukewarm to a degree, Kleinhenz said it is better to look at things with a big picture view, explaining that economic fundamentals remain strong while the characterization of the economy is not simple.

“Employment during the first six months of this year expanded at its strongest pace since 2005, and households continue to repair their balance sheets,” he wrote. “Business and consumer confidence have edged higher, manufacturing activity has expanded, state and local revenues have risen, and inflation pressures remain tame. Despite these improvements, lackluster income growth, uneven housing demand and the cautious attitude by businesses toward capital spending remain drawbacks in terms of further economic growth. Additionally, there remains a hint that global economic growth is still unsteady, affecting the overall picture for U.S. expectations.”

Other factors to watch and keep in mind, cited by Kleinhenz, included; how consumer spending should be able to positively leverage labor market gains; potentially, the new reported high for America’s household’s net worth; pent-up demand and inflation remaining below the Federal Reserve’s target, with that growth keeping things on track for the Fed to raise interest rates around mid-2015; consumers remain cautious, selective, and price-sensitive and raises issues about how fast the economy is expected to grow.

Even with such a mixed bag of things to pull from, Kleinhenz concluded by saying the NRF is optimistic that the economy will gain in strength over the rest of the year.

Again, retail sales data is a metric that supply chain stakeholders need to follow and pay attention to. Freight depends on it, perhaps now more than ever.