Research - FEBRUARY 7, 2019

U.S. retail sales expected to top $3.8t in 2019

by Andrea Zander

U.S. retail sales are expected to rise between 3.8 percent and 4.4 percent to more than $3.8 trillion in 2019, according to the National Retail Federation, citing high consumer confidence, low unemployment and rising wages.

“More people are working, they’re making more money, their taxes are lower and their confidence remains high,” said Matthew Shay, NRF president and chief executive. “The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds. It’s time for artificial problems like trade wars and shutdowns to end, and to focus on prosperity not politics.”

Preliminary estimates show retail sales grew 4.6 percent in 2018 to $3.68 trillion, exceeding the retail industry group’s forecast for growth of at least 4.5 percent. The number includes online and other non-store sales, which were up 10.4 percent at $682.8 billion. That met NRF’s forecast of 10-12 percent online growth, and online is expected to grow in the same 10-12 percent range again this year. The numbers exclude automobile dealers, gasoline stations and restaurants.

Growth of between 3.8 percent and 4.4 percent would result in total 2019 retail sales of between $3.82 trillion and $3.84 trillion. Based on growth of 10-12 percent, online sales would total between $751.1 billion and $764.8 billion, which are included in the total.

“We are not seeing any deterioration in the financial health of the consumer,” said Jack Kleinhenz, NRF chief economist. “Consumers are in better shape than any time in the last few years. Most important for the year ahead will be the ongoing strength in the job market, which will support the consumer income and spending that are both key drivers of the economy. The bottom line is that the economy is in a good place despite the ups and downs of the stock market and other uncertainties. Growth remains solid.”

NRF expects the overall economy to gain an average of 170,000 jobs per month, down from 220,000 in 2018, and that unemployment — currently at 4 percent — will drop to 3.5 percent by the end of the year. Gross domestic product is likely to grow about 2.5 percent over 2018.

Kleinhenz said inflation and interest rates are expected to remain low this year and that retail sales have been helped by recent reductions in gasoline prices.

Retailers so far have been able to largely mitigate the impact of new tariffs on steel, aluminum and goods from China imposed in the past year. But tariffs could drive up the cost of consumer products and affect business direction and profits this year, particularly if tariffs on $200 billion in Chinese products rise from 10 percent to 25 percent as currently scheduled for March 1, he said.

It has been difficult to measure the impact of the recently ended government shutdown. Government workers will be paid retroactively but some spending and expenses such as dining out or entertaining have been lost and government contractors will not receive back pay, Kleinhenz said. A key issue is how quickly the Internal Revenue Service will be able to process a potential backlog of tax returns, which would affect first-quarter spending, he said.


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