NRF predicts modest sales growth in 2013

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Retail industry sales will increase 3.4 percent in 2013, according to the National Retail Federation’s economic forecast.

That’s less than the 4.2 percent increase seen in 2012, but the subdued forecast comes on the heels of a holiday season that had to compete with political wranging about the fiscal cliff. In the end, holiday sales in 2012 grew 3 percent.

Online sales will see increased improvement, however, with 2013 sales expected to grow between 9 percent and 12 percent. In 2012, online sales grew 11.1 percent in November and December alone.

“What we witnessed during the holiday season is an indication of what we are likely to see in 2013. Consumers read troubling economic headlines every day and look at their bottom lines at the end of the month, and they don’t like what they see,” NRF President and CEO Matthew Shay said. “Pushing fiscal policy decisions down the road will lead to even greater uncertainty, and will continue to impact consumers’ desire and ability to spend on discretionary items. The administration and congress need to pursue and enact policies that lead to growth and economic expansion, or it could be another challenging year for retailers and consumers alike.”

A number of factors contributed to NRF’s 2013 economic forecast, including:

• Employment: The labor market continues its modest recovery but 2013 is not expected to result in meaningful acceleration in growth. As of December 2012, the unemployment rate has held steady for the last two months at 7.9 percent. Retailers on average employed 150,000 more workers in 2012, and the industry remains one of the biggest employers in the world.

• Income growth: Consumers are constrained by modest growth in income, and recent legislation passed in January increased payroll taxes for millions of workers, further limiting and Americans spending decisions.

• Housing: NRF expects the housing sector to continue to improve and the fundamentals for growth to see continued gains in 2013.

• Inflation: Price pressures continue to be contained. NRF expects the Consumer Price Index to increase 1.9 percent in 2013, below the 2.1 percent increase in 2012.

• Consumer confidence: Current consumer attitudes are likely weighed down because of the handling of the fiscal cliff and the increase in payroll taxes. We expect confidence to improve as the pace of the recovery accelerates in the second half of 2013.

“While it’s too early to know the full effect of higher payroll taxes, there’s no question that many consumers will feel some kind of impact from the change in their paychecks,” said NRF Chief Economist Jack Kleinhenz. “That said, consumers have in the past shown a resiliency in the face of uncertainty, and we expect those impacted to adjust to smaller budgets by trading down or simply cutting back on certain items. Overall we foresee some improvements in the second half of the year should the outlook for job creation and income growth improve.”