The National Retail Federation  predicts that retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 4.8 percent from last year. According to its quarterly Retail Sales Outlook report, released this morning at NRF’s 96th Annual Convention & EXPO, NRF expects subdued first half economic growth to give way to accelerated sales in the second half.

Retail sales increased 6.3 percent in 2006, said NRF chief economist Rosalind Wells. The stronger-than-expected sales surge was fueled by robust consumer spending in the first half of the year.  As expected, the sales picture weakened in the second half as consumer spending power was challenged by the housing slowdown, high energy costs and lackluster employment growth. 

“This year, slow economic growth will be reflected in moderate consumer spending and retail sales gains,” Wells said.  “The quarterly industry sales pattern will be the opposite of last year with modest gains early in the year and better increases in the second half.”

As a result of the slowdown in housing, sales increases at building material and garden equipment stores experienced a sharp deceleration last year. Strong gains of 20 percent at the beginning of the year slid to -4.3 percent at year-end. Furniture stores also saw an 8 percent sales gain in the first quarter moderate to 2.5 percent toward year-end. Other categories, such as general merchandise stores, apparel specialty stores, health and personal care stores, and food and beverage retailers maintained steady sales gains in the mid-single digit range.

According to the Outlook, industry sales gains of 3.8 percent in the first quarter should increase to 4.6 percent in the second, 5.2 percent in the third, and 5.7 percent in the final quarter. For the year as a whole, industry sales are expected to be up 4.8 percent.

Current retail trends will persist throughout the year. Luxury retailers will continue to outperform. Online shopping will continue to escalate. Retailers catering to the lower and mid-level income consumer will find achieving sales gains more challenging.  Demand for merchandise related to the home will be impacted by a soft housing market.

JCK