Retail Sales Expected to Increase by 3.4% in 2012, NRF Says

Photo Credit: The Oregonian

Retail industry sales are expected to rise 3.4 percent to $2.53 trillion in 2012, according to the National Retail Federation—slightly lower than the pace of 2011, in which sales grew 4.7 percent. NRF excludes the sales of autos, gas and restaurants in its definition of retail sales.

Many economists estimate that real U.S. GDP will rise approximately 2.1 to 2.4 percent as the economy is still being plagued by stubbornly high unemployment and uncertainty over job growth, NRF says.

“Our 2012 forecast is a vote of confidence in the retail industry and our ability to succeed even in a challenging economy, said Matthew Shay, NRF president and CEO “Over the last 18 months, retailers have been on the forefront of the economic recovery – creating jobs, encouraging consumer spending, and investing in America.”

Many factors will continue to influence the expected slowdown in consumer spending, but none remain more cumbersome than the stalled unemployment rate and lack of newly-created jobs, NRF said. A number of factors contributed to NRF’s 2012 economic forecast, including:

* Employment: The number of Americans out of work is at its lowest level in nearly three years, and the rise in employment and hours worked should bolster income and spending.

* Income growth: Consumers are constrained by modest growth in income. Congress extended the cuts in payroll taxes and unemployment benefits for only two months. While these provide a lift, and are likely, consumers may act cautiously until both are approved. Income is predicted to lag consumption on a year-over-year basis.

* Housing: While most of the economic reports dealing with housing have shown a little more strength, these reports should be treated with caution, as some of the improvement is due in part to unseasonably mild weather. NRF expects home sales and construction will improve slightly in 2012 with low interest rates and affordability at an almost 30 year high.

* Inflation: Increase costs have been a drain on consumer purchasing power due to extraordinary agricultural commodity price inflation as well as high oil prices due to global geopolitical tensions. NRF expects inflation to slow down near a two percent range. Rising gas prices may also put pressure on spending.

* Consumer Credit: Easier lending standards are expanding consumer credit. Revolving credit appeared to break out from its holding pattern showing a big surge in November, which indicates consumers have confidence to take on debt.

* Consumer confidence: Confidence continues to rebound from August lows but remains fragile given volatile financial market conditions and anemic housing markets.