NRF Forecasts Increased Retail Sales

Last year, consumers seemed deeply worried about their finances. In addition to threats of a recession, they saw rising interest rates and even bank failures – plenty of reasons for consumers to tighten their belts and spend less. But despite those worries, CNBC reported in January that on a year-over-year basis, 2023 retail sales ended up 5.6%. The National Retail Federation (NRF) reported a 3.6% annual sales growth of $5.1 trillion last year. 

Looking ahead into this year, the NRF still expects to see increases in retail sales, although not quite at last year’s levels. 

The NRF forecasts retail sales will increase this year between 2.5% and 3.5% to between $5.23 trillion and $5.28 trillion. The announcement was made during NRF’s fourth annual State of Retail & the Consumer virtual discussion on the health of American consumers and the retail industry. 

“The resiliency of consumers continues to power the American economy, and we are confident there will be moderate but steady growth through the end of the year,” says Matthew Shay, president, chief executive officer, NRF. “Successful retailers offer consumers products and services when, where and how they want to shop with prices they want to pay.” 

This year’s forecast is in line with the 10-year, pre-pandemic average annual sales growth of 3.6%.  

Non-store and online sales, which are included in the total figure, are expected to grow between 7% and 9% year over year to a range of $1.47 trillion to $1.50 trillion. That compares with non-store and online sales of $1.38 trillion last year.  

John Furner, president, chief executive, Walmart, also spoke during the virtual discussion, noting most customers expect this year to be better than the last.  

NRF projects full-year GDP growth of around 2.3%, a slower speed than the 2.5% in 2023 but strong enough to sustain job growth. Inflation prices are also expected to moderate to 2.2% on a year-over-year basis, due to a cooling economy, the labor and product market coming into better balance and retreating housing costs.  

“The economy is primarily supported by consumers who have shown much greater resilience than expected, and it’s hard to be bearish on the consumer,” says Jack Kleinhenz, chief economist, NRF. “The question for 2024 ultimately is, will consumer spending maintain its resilience?” 

The (Un)Employment Outlook 

One factor affecting sales is a decrease in jobs. Robust job growth and wage gains fuel consumer spending. But, according to the NRF, a tightening labor market threatens to cool the pace of the economy this year. The NRF expects about 100,000 fewer jobs on average per month compared with 2023 and the unemployment rate to average 4% for the full year.  

While many consumers are feeling a pinch from tighter credit and inflation, they don’t seem ready to throw in the towel. Kleinhenz notes that consumer balance sheets and debt-servicing levels remain in good condition. Rising home and stock prices last year likely stimulated greater consumer spending via the so-called “wealth effect” and this appears likely to continue in 2024. Several surveys reveal consumers appear to have a generally favorable outlook which should also support their willingness to spend.