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WASHINGTON — The National Retail Federation (NRF) expects retail sales growth to slow this year as the pandemic-fueled spending boom fades and inflation forces shoppers to tighten their belts.
In its annual forecast, NRF foresees retail sales of between $5.13 trillion and $5.23 trillion on growth of between 4% and 6% from 2022 levels.
“While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historic levels,” according to Matthew Shay, NRF’s president and chief executive officer.
The 2023 figure compares with 7% annual growth to $4.9 trillion in 2022. The current-year forecast is above the pre-pandemic average annual retail sales growth rate of 3.6%.
“In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” Shay said. “Retailers are prepared to serve consumers in the current economic environment by offering a range of products at affordable prices with great shopping experiences.”
NRF’s annual sales forecast was announced last month during the third annual “State of Retail & the Consumer” virtual conversation, where retail executives from major brands, prominent economists and consumer experts discussed the health of American consumers and the retail industry.
Non-store and online sales, which are included in the total figure, are expected to grow between 10% and 12% year over year to a range of $1.41 trillion to $1.43 trillion.
While many consumers continue to utilize the conveniences offered by online shopping, much of that growth is driven by multichannel sales, where the physical store still is an important component in the fulfillment process, according to NRF, which asserts that brick-and-mortar stores remain the primary point of purchase for consumers, accounting for about 70% of retail sales.
NRF supplies data on retail sales each month and also forecasts annual retail sales and spending for key periods such as the holiday season each year. The federation’s calculation of retail sales excludes automobile dealers, gasoline stations and restaurants to focus on core retail.
On the U.S. economy, NRF projects GDP growth of around 1% this year, compared to the 2.1% increase in 2022. Inflation is on the way down, NRF said, but will remain between 3% and 3.5% for all goods and services this year.
NRF sees job growth decelerating in 2023 in lockstep with slower economic activity. The unemployment rate is projected to surpass 4% before year-end.
Aggregate economic activity has held up well as the Federal Reserve has been raising interest rates to slow the economy and bring rapid inflation under control, according to Jack Kleinhenz, NRF’s chief economist.
Nonetheless, recent developments in the financial markets and the banking sector, as well as some unresolved public policy issues, complicate the federation’s crystal ball, Kleinhenz acknowledged.
“While it is still too early to know the full effects of the banking industry turmoil, consumer spending is looking quite good for the first quarter of 2023,” Kleinhenz said.
