The National Retail Federation has updated its retail sales forecast for 2018, declaring that tax reform and other economic inputs would boost revenues more than previously predicted but warning that tariffs threaten to dampen consumer confidence.
NRF now expects 2018 retail sales, excluding those from automobile dealerships, gasoline stations and restaurants, to increase at a minimum rate of 4.5% year over year rather than at the 3.8% to 4.4% rate forecast earlier this year. It asserted that retail sales in the first half of 2018 gained 4.8% versus the period a year earlier and have been up 4.4% year over year in its most recently identified three-month moving average.
NRF added that it expects 2018 gross domestic product to grow at the higher end of the 2.5% to 3% range that it forecast earlier.
“Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation’s consumer-driven economy,” said Matthew Shay, NRF president and CEO. “Tax reform and economic stimulus have created jobs and put more money in consumers’ pockets, and retailers are seeing it in their bottom line. We knew this would be a good year, but the first half turned out to be even better than expected. However, a tremendous amount of uncertainty about the second half remains. It could be a banner year for the industry, or we could keep chugging along at the current rate.”
Tariffs of 25% on $34 billion worth of Chinese goods took effect in July with tariffs on another $16 billion worth slated to take effect this month, although NRF emphasized that both lists include a proportionately small number of consumer products. The administration in Washington is considering another round of tariffs on $200 billion in Chinese goods, one that would include a broader array of consumer products, which could be finalized in September.
Imports have entered the United States at record levels this summer as retailers bring merchandise into the country before the tariffs can take effect, according to NRF’s Global Port Tracker report.
Shay added that NRF doesn’t want economic advances “derailed by protectionist trade policy. With retailers ramping up imports and stocking their warehouses before most of the proposed tariffs will take effect, an immediate impact on prices on consumer goods is unlikely, but that won’t last for long. And just the mere talk of tariffs negatively impacts consumer and business confidence, leading to a decline in spending. It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them.”