The National Retail Federation on Wednesday forecast that retail sales during 2019 will rise "between 3.8 percent and 4.4 percent to more than $3.8 trillion despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown."
The group's preliminary estimates for retail sales last year is for growth of 4.6% over 2017 to $3.68 trillion, exceeding its previous forecast of at least 4.5%, according to a press release.
That number includes online and other non-store sales (excluding automobile dealers, gasoline stations and restaurants), which alone grew 10.4% to $682.8 billion, meeting the NRF forecast. The organization expects e-commerce to continue to grow in the same 10% to 12% range again this year, according to the release.
Volatility in markets, exacerbated by a government shutdown that could be reprised again this month and tariffs, and threats of tariffs, that continue to bedevil retailers, shook consumer confidence and other economic factors recently.
The NRF itself was forced to forgo the government's numbers for its report. Its results for 2018 are based on U.S. Commerce Department data through November and include only NRF estimates for December because the agency was closed during the recent government shutdown and has not yet released December figures, the group said. That means NRF's report is subject to revision once December numbers are released.
"We are not seeing any deterioration in the financial health of the consumer," NRF Chief Economist Jack Kleinhenz said in a statement. "Consumers are in better shape than any time in the last few years. Most important for the year ahead will be the ongoing strength in the job market, which will support the consumer income and spending that are both key drivers of the economy. The bottom line is that the economy is in a good place despite the ups and downs of the stock market and other uncertainties. Growth remains solid."
Growth looks to be recovering after a shaky January, but "solid" may not be the right word. In a Feb. 6 research report emailed to Retail Dive, Wells Fargo analysts noted signs of ebbing growth worldwide. "Not only were there signs of slower global growth, but the Fed seemed to be on a preset course of tightening monetary policy further," they wrote, noting "escalating" trade tensions with China, "some turmoil within the Trump administration," and a "swoon" to the December stock market. "Tighter financial conditions, if maintained, can lead to slower economic growth, if not to outright economic contraction."
The volatility that emerged in December and into January "has subsided and credit, the lifeblood of the economy, continues to flow to the non-financial sector," they also said. "Solid growth in credit at present reinforces our conviction that U.S. economic growth will remain resilient in 2019, albeit a bit slower than last year."
While NRF also noted the resiliency displayed by the American consumer, that too has taken a beating. Consumer sentiment as measured by the University of Michigan Survey of Consumers declined 7.2% from December to January and 4.7% year over year. January ended with the lowest level of consumer confidence since Donald Trump's election, and "the end of the shutdown caused only a modest boost in the Sentiment Index," according to Surveys of Consumers chief economist Richard Curtin. And while consumer confidence tends to rebound fairly quickly after taking hits from what Curtin called "crisis events," that's unlikely to happen because another shutdown looms, he also said.
"If the standoff continues into late February, it could foster sustained declines in economic optimism among consumers," he warned in the report. "Even small spending cutbacks, occurring simultaneously across the majority of consumers, could push the economy into a recessionary downturn. Each proponent in the shutdown debate appears to put more weight on the political rather than on the economic implications of their actions."
Consumers remain sanguine about their financial prospects, but not about future job gains, mostly because of the shutdown, according to Curtin. "There is still time to avoid a sustained decline in confidence, but it would require an end to the standoff," he said. Contrary to the NRF prediction, he sees consumer spending rising 2.6% this year if consumer confidence holds steady at its current level.