Live from NRF: 2007 Retail Sales Predicted to Grow 3.5%
The National Retail Federation is forecasting a 3.5% increase in retail sales this year, the lowest hike since 2002.
Factors contributing to decreased consumer spending include a slumping housing market, a slowing job market and rising costs for energy and food, NRF Chief Economist Rosalind Wells said yesterday.
“All these pressures give consumers anxiety,” Wells said. “Consumers are becoming more cautious about their spending.”
Shoppers instead will focus on paying down debt, spending more in line with their income growth and showing more restraint when it comes to discretionary purchases, she added. In turn, retailers will be forced to market to more practical consumers and growing desires by consumers’ to stretch their dollars.
Categories in particular like home furnishings, luxury goods and online shopping will “feel the pinch,” Wells said.
“Retailers will face a challenging sales environment in 2008,” according to the NRF’s Retail Sales Outlook. “Consumers’ reticence to spend freely, so apparent in holiday 2007 sales, will be perpetuated into this year.”
In 2007, retail sales rose by 4%, according to the NRF.
Estimates on 2007 holiday sales put spending at a 4% increase compared to 6.4% growth in 2006. Retailers used promotions to lure customers in stores in November and December. And gift cards also boosted the bottom line. The NRF estimates consumers spent $26.3 billion was spent on gift cards, up from $18.5 billion in 2005.
Final holiday sales figures are due out today.
But the outlook isn’t all bleak. The NRF says the slow pace in sales growth will give way to stronger sales in the third and fourth quarters. Further changes by the federal government to lower interest rates should also have a positive impact on the economy, Wells said.
