National Retail Federation Bullish on Business in 2018

Expect a good business year in 2018.

The National Retail Federation, a Washington, D.C.–based trade group, predicted that retail sales will grow 3.8 percent to 4.4 percent this year compared to last year as consumers take their tax savings and start shopping.

This is on par or slightly better than 2017, when retail sales grew 3.9 percent with U.S. consumers spending $3.53 trillion, said Matthew Shay, the NRF’s president and chief executive officer.

“These numbers confirm that retail is alive and well,” Shay said in a Feb. 8 conference call with reporters. “It makes the point that retail is thriving. It is healthy. It is doing what it has always done. It is changing and evolving.”

He later noted that his comments were made despite the fact that 7,000 stores closed in the United States last year, which shook the industry.

The strong forecast is based on reports of high consumer confidence, a low unemployment rate of 4.1 percent in January and good business during the 2017 holiday sales season.

Sales for the 2017 holiday retail sales season beat NRF’s forecasts. It increased 5.5 percent to $691.9 billion after the NRF had initially forecast that sales would increase to at most 4 percent or $682 billion, said Jack Kleinhenz, the NRF’s chief economist.

“The economy was in great shape going into the holiday season, and retailers had the right mix of inventory, pricing and staffing to help them connect with shoppers very efficiently,” Kleinhenz said about holiday sales. “The market conditions were right, retailers were doing what they know how to do and it all worked. We think the willingness to spend and growing purchasing power seen during the holidays will be key drivers of the 2018 economy.”

Consumer confidence remained high through the first month of 2018, said Lynn Franco, director of economic indicators for The Conference Board, the nonprofit that charts the sentiment of U.S. consumers. Confidence dipped in December, but it increased in January.

“Consumers’ assessment of current conditions decreased slightly but remains at historically strong levels. Expectations improved, though consumers were somewhat ambivalent about their income prospects over the coming months, perhaps the result of some uncertainty regarding the impact of the tax plan. Overall, however, consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018,” Franco said.

Shay and Kleinhenz were bullish about an economic windfall expected to come from the tax-reform bill passed by Congress in December 2017. Estimated savings from tax cuts could be as high as $175 billion. The two forecast that savings from reduced taxes would be reinvested in businesses and show up in bigger paychecks for workers. A portion of the bigger paychecks will be spent at retailers this year.

The National Retail Federation also had a bullish forecast for online sales. Online and non-store business is expected to grow 10 percent to 12 percent.