The National Retail Federation predicts that retail industry sales for 2006 (excluding automobiles, gas stations, and restaurants) will increase 4.7 percent from 2005. In its quarterly Retail Sales Outlook Report, released Monday. NRF says it expects a slowdown in the economy and consumer spending to restrain industry sales gains.
A stronger than expected 2005 saw retail sales increase 6.1 percent, slightly higher than the 5.6 percent gain NRF had been forecasting. However, tough comparisons, rising energy costs and a slowdown in the housing market have caused NRF to expect subdued retail sales growth in 2006.
“With the housing market beginning to slow, consumers will be challenged to find new sources of spending power.” said NRF chief economist Rosalind Wells. “The strong retail sales we saw in the second half of 2005 will be replaced by more conservative spending in the New Year.” NRF expects 2006 first quarter retail sales to increase 5 percent, compared to gains of 6.5 percent in the fourth quarter of 2005.
While NRF is more cautious about the 2006 outlook, several categories of specialty retailing should continue to achieve solid sales growth. They include clothing and accessory stores (which include shoe stores and jewelry stores), food and beverage retailers, and health and personal care retailers. These categories are expected to see steady sales gains in the 4 to 5 percent range.
Some of the sales trends by type of retail establishment seen last year will continue into this year, but with somewhat smaller increases. The highest growth last year was achieved by building material stores, warehouse clubs, and electronic shopping. NRF expects building-related outlets to lose some momentum as housing softens. The same is true of furniture stores. Electronics retailers should be able to sustain strong demand for their merchandise as product excitement and attractive pricing will lure consumers. Sales gains at discount stores improved at year-end as increases at luxury goods retailers eased.
The Federal Reserve will play a major role in the consumer’s ability to bounce back in 2006. As the chairman of the Federal Reserve Ben Bernanke takes the reigns from longtime chairman Alan Greenspan, NRF says it expects the Fed policy of vigilance toward inflation to continue. “In the near-term,” NRF says, “underlying inflationary pressures appear to be under control. Productivity is still quite high and, as a result, unit labor costs are low. These trends should give the Fed some peace of mind.”