NRF lowers retail sales forecast

Dive Brief:

The National Retail Federation lowered its expectations for the year and now says that retail sales — excluding automobiles, gasoline stations and restaurants — will rise 3.2% to 3.8%, down from its previous forecast for between 3.7% and 4.2%.
Government analysis of retail sales numbers, income and consumption, reflecting weaker-than-expected spending, drove down the NRF’s projections, NRF Chief Economist Jack Kleinhenz said in an email.
Total retail sales have grown year-over-year every month since November 2009, and retail sales as calculated by NRF have increased year-over-year in all but one month since the beginning of 2010, according to an email from the organization to Retail Dive.

Dive Insight:

In February, when the NRF released its initial forecast for the year, the worry for retailers was that the impact of federal tax and trade policies — or even the prospect of such policies — could undermine that stability by introducing uncertainty that weighs on consumer sentiment. These concerns apparently alluded to rumors, widely circulating at the time, of a Republican-supported import tax.

The border tax never materialized, but worries have now turned to the U.S. consumer, who has been steadily growing more confident since the Great Recession. The NRF’s more muted forecast comes after analysis from financial services firm Cowen & Co. warned that the wage gap appears to be widening once again and that consumers, especially at lower income levels, are showing signs of financial stress.

Costs like health care are rising, and could be exacerbated by the Trump administration’s reversal of Obama-era overtime regulations and other pro-labor rules, according to the report. Both trends are likely to pressure spending and retail pricing, though they could also boost discount retailers, Cowen analysts said.

The shift makes the holiday season all the more crucial for retailers. "While weaker-than-expected spending in the first quarter, along with decelerating inflation, has also contributed to the revision, NRF anticipates stronger sales heading into the fall and holiday seasons," Kleinhenz said.

This story is part of our ongoing coverage of the 2017 holiday shopping season. You can browse our holiday page and sign up for our holiday newsletter for more stories.