Dive Brief:

• The National Retail Federation on Wednesday released its economic forecast for 2017, projecting that retail industry sales (excluding automobiles, gas stations and restaurants) will grow between 3.7% and 4.2% over year-ago totals. 

• Online and other non-store sales, which are included in the overall number, alone are expected to increase between 8% and 12%, the NRF adds.

• Those increases are predicated on the assumption that the “economy is on firm ground,” said NRF President and CEO Matthew Shay.

Dive Insight:

The NRF’s forecast is based on the U.S. economy’s current strength: The nation is expected to gain an average of approximately 160,000 jobs a month, down slightly from 2016 but consistent with labor market growth, the organization found. Unemployment is expected to drop to 4.6% by the end of the year, and economic growth is likely to be in the range of 1.9% to 2.4%, by the NRF’s measure.

But NRF officials warned that some federal tax and trade policies — or even the prospect of some policies — could undermine that stability by introducing uncertainty that weighs on consumer sentiment, apparently alluding to a Republican-supported import tax expected to be debated in Congress soon. 

“With jobs and income growing and debt relatively low, the fundamentals are in place and the consumer is in the driver’s seat," Shay said in a statement. "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."

While Shay didn’t mention the so-called “border adjustment tax” favored by Congressional Republicans, the NRF has recently come out firmly against it. That proposal, published last summer in Republicans’ “A Better Way” document, includes a lowered 20% corporate tax rate, a switch to a territorial system, and the “border adjustments” (taxes on imports but not exports), which proponents say will deter U.S. companies from instituting so-called inversions. Analysts contend that for most large retailers, the lower tax rate won’t sufficiently make up for lost sales due to the higher prices wrought by import taxes.

NRF Chief Economist Jack Kleinhenz tried to steer lawmakers to consider their policies’ effects on the consumer, warning that drastic changes could undermine consumer confidence and calling for clarity that would help both consumers and businesses.

“Prospects for consumer spending are straightforward — more jobs and more income will result in more spending,” Kleinhenz said. “Regardless of sentiment, the pace of wage growth and job creation dictate 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.”

In a climate that does enjoy the stability NRF officials are hoping to maintain, e-commerce and omnichannel sales will continue to grow, Kleinhenz added. “It is clear that online sales will continue to expand in 2017 and provide growth for the retail industry,” he 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.”