On a conference call Wednesday morning for members of the media, the National Retail Federation (NRF) said it was lowering its retail sales forecast for 2014. In January, NRF forecasted retail sales would grow 4.1 percent in 2014 over 2013, but today it reported 3.6 percent growth for the first six months of the year.
The organization also reported that sales grew 2.9 percent during the first half of the year, but estimated that growth in the second half would hit 3.9 percent. The stats include brick-and-mortar and online sales, but exclude automobiles, gasoline, and restaurants.
The severe weather in early 2014, global economic softness, and shifts in consumer spending behavior (it was mentioned that price sensitivity remains at near-recession levels) were pinned to the lackluster numbers.
But NRF chief economist Jack Kleinhenz was quick to point out that, “unemployment and consumer confidence are improving—to characterize the economy as in poor shape is [incorrect].”
His prediction hinges on a number of factors, among them sinking unemployment. Unemployment in June was at 6.1 percent, according to the Bureau of Labor Statistics, down from the stultifying 9 percent–plus numbers seen in 2009, 2010, and 2011.
Though the housing market is still unpredictable, Kleinhenz said the influx of cash buyers this year in the market is helping to mitigate the category’s choppiness—citing the Consumer Price Index report released on Wednesday that said 35 percent of homes sold in 2014 so far were paid for in cash. RealtyTrac reports that total foreclosure activity in June 2014 was the lowest since the housing bubble burst in August 2006 in 10 states, including Texas, Georgia, Colorado, Tennessee, Arizona, and Nevada.
Still, Kleinhenz said, “I think consumers remain modest spenders—they’re cautious, selective, price sensitive. And this raises issues on how fast this economy can grow.”
“The challenge is that we’re in this really low-growth environment,” said NRF president and CEO Matthew Shay. “In spite of stock numbers and existing home sales, people aren’t feeling the recovery. We haven’t attached everyone to the recovery. If you’re in the stock market or you have a home, you feel confident and you’re spending. If you don’t, you’re not…the consumers are not where we want them to be.”
Kleinhenz said the recovery from the recession, when compared to recessions in the past, is taking much longer. “What we’re seeing is the reflection of a very explosive downgrade and contraction of the economy due to the financial crisis,” he said. “Based on history, the time it takes to get back to expansion mode tends to take many years…. It is surprising it’s taken so long for us to get traction. Past recovery times have been shorter—usually five to five and half years, and we’re already past that.”