NRF Revises 2014 Sales Forecast, Anticipates Stronger Second Half

Retail sales (excluding automobiles, gas stations and restaurants) are expected to advance at a stronger pace for the second half of this year, as compared with the first six months, according to the National Retail Federation, noting that sales are expected to equal or exceed 3.9%, compared with the 2.9% percent reported for the first half of 2014.

The NRF is also revising its previously stated 4.1% forecast for annual retail sales growth to 3.6%, in the aftermath of a cold start for retailers and a major downshift in overall U.S. economic growth earlier this year. The revised NRF estimate also reflects downward revisions to final annual retail sales back through 2012 that were made by the U.S. Census Bureau in April. NRF is still expecting non-store sales to increase between 9% and 12%.

“Going into 2014, my view was that the U.S. economy would continue to improve, led by much more balance across sectors. However, economic growth in the first quarter was weaker than expected due in part to poor weather,” said Jack Kleinhenz, chief economist for the NRF. “Compared with what was reported at the end of 2013, real estate, inventories and exports were all weaker in the first quarter, thus dragging down any progression and growth expectations. And, while some of the weakness was been reversed in the second quarter, I don’t expect the economy to come roaring back. Further improvement in growth will likely continue at a modest to moderate pace. 

“Economic fundamentals remain strong but the characterization of the economy is not simple. Employment during the first six months of this year expanded at its strongest pace since 2005, and households continue to repair their balance sheets. Business and consumer confidence have edged higher, manufacturing activity has expanded, state and local revenues have risen, and inflation pressures remain tame. Despite these improvements, lackluster income growth, uneven housing demand and the cautious attitude by businesses toward capital spending remain drawbacks in terms of further economic growth. Additionally, there remains a hint that global economic growth is still unsteady, affecting the overall picture for U.S. expectations.”   

Looking ahead,  Kleinhenz continued, consumer spending is expected to continue to grow, benefiting from the ongoing improvement in the labor market and potentially the reported new high for American household’s net worth. Other positive factors include evidence of pent-up demand and inflation remaining below the Federal Reserve’s target.