On a conference call Wednesday morning for members of the media, the National Retail Federation (NRF) lowered its retail sales forecast for 2014. In January, NRF forecasted retail sales would grow 4.1 percent in 2014 over 2013, but today reported a 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 estimate that growth in the second half will hit 3.9 percent. The stats include bricks-and-mortar and online sales, but exclude automobiles, gasoline stations, and restaurants.
The severe weather in early 2014, along with a shift in consumer spending behavior — price sensitivity remains at near recession levels — were blamed for the lackluster numbers.
But NRF chief economist Jack Kleinhenz was quick to point out that, “Income employment and consumer confidence are improving – to characterize the economy as in poor shape is [incorrect].”
His prediction hinges on a number of factors. Unemployment has declined steadily; unemployment in June was at 6.1. percent, according to the Bureau of Labor Statistics, down from the staggering 9 percent-plus numbers seen in 2009, 2010, and 2011.
Though the housing market is still in flux, Kleinhenz said the influx of cash buyers this year in the market are helping to mitigate the market’s choppiness. 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.
However, employment has grown at its strongest pace since 2005, business and consumer confidence have edged higher, manufacturing activity has expanded and inflation pressures remain tame, improving expectations for the second and third quarters.”??
Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the nation’s economy.
CPI report – housing market has been giving off mixed signals. We’re seeing weak mortgage apps, but lots of cash sales.
Going into second quaterte, we’ve seen a picku p in growth – there’s still slack in job market…but I think unemployement rate should continue to pull downaards. Openings have been up at a high level.
Certainly there are concerns out there – it’s had an easing ong growth int eh 1st quarter.
There’s been a rally in credit
Census made changes and somewhat changes trajectory of retail sales trend.
In summation, I think consumers remain modest speders – thet’re cautious, selective, price sensiteive. Raises issues on how fast this econ can grow.
I think the outlook really requires a conuties low intereste rate to support consumer spending.
NRF President and CEO Matthew Shay
I htinkt it’s pretty clear we’re not making news today by ackonowldeing that the first half of this year has been reasly tough and it’. The positive message is how strong we think the 2nd hal fot he year will be. The challenge is we’re in this relaly lo-wgorwith environment. In sptie of stock numbers and existing homes sales, peopelk aren’t feelignt eh recovery. Consumers are feeling confirdenteen top to bottom. We haven’t attached everything to the recovery – we’ve been sayignt his for year.s.
If you’ reint eh stock market or you have a home, you feel confifendet and you’re spening. If you don’t,
I think retailer feel cautiously optimistic about the second half of this years. But there are shcllanges, and there are winners and losers in eery category. Across the board – there are opp to compete successfully in every single one of those catoegry, it’s just not possible that eveytyin’es going to do it.
The consumers aren not where we want themt o be.
While we see positive signs for second half of the year, this remains a tough environemtn, and consumers are very price sensitive and that’s something inon gteh minds of CEOS evey single day.
NRF Senior Vice President David French
Legislation in DC – what would you highlight as more imprirntat piece of legistlation?
In the near temr, we see an opp to finally resove the sakles tax collection issue – tiwth passage of legistlation to elel playing field between bricks na donline. That bill is a live item in the senate – now tied to possible tax freedom act in the sentate. Might be resolved by the end of th year .
Severla policy issues pending that haven’t achcieved enough momentum – immigration – many Americans are not as familiar with. CBO deteremined longterm grow the GDP 2023 3 percent by 2023. In every meansure, immigration refrm is good fo rhte economy – wages, tax revnue, …
‘The corporate tax rate – longtime proopneonets of corprorate tax reform – liongterm GDP will be 1.5 to 2.6 percent lower, consumer spending spending with be lower because pf our high corporate tax rate. If we could bring it back down…we could libertate a lot more consumer spending and create a lot more jobs.
Trade policy – treade policy has been stuck in neautral for a long time. Wants expenaded trade opportunities.
NRF Chief Economist Jack Kleinhenz
Any historical precendence for what we’re going through?
What we’re seeing is the relfection of a very exptnsioive downgrade and contraction of the economy due otto the financial scrisri. Base don history, the time it takes to get back to expansion mode tends to take many years.
We already kind fo used up our fisalcl policy [options] years ago – and to realy ont eh fed to be able to do so, it’s not designed to do so. It is surpsriing it’s taken so long for us to get traction, Past recovery times have been shortes – usually 5 to 5.5 years, and we’re already past that.
I think there are other issue s—global softness in economies also feed int the US economy.
Elimate the term ominchannel – at some poeint
Courteny Reagan CNBC:
I uderand your new gorth forecast also include the non-store sales as well as in-store sales – as you onw, online has become bigger part of retail sales. How much online vs. in-store;
JACK: We’re llokgina t gorwith bet 9-12 percent for non-store – approx. 5 to 6 % of yoy retail sales.
JACK: 4.1 percent for first half fo the year – we’re coming around to 2.9% (don’t’ have revidsed numenr for June yet). Looking forward, about 3.9%.
How breask apart as far as mobile nad tablet: Jack dones’ tbreak it down in mobile and tablet.
3.6% — total for the year – 3.2 trillion
It is getting tiresome to be in first gear for so long. It’s never taken so long. Having said that, retailer are out there every day fighting for marketshare. Most people think of retail bsuinesses from their sales experience nd you don’t’ always think about the level of innovation and invenstemtn to make them successful and connec tiwth consumers. That’s thwhere you’re going to see retailers investing. Tge real opportunites for success – companies that had succefully taken steps to ingtergrate the entire sales experience – end e to end — ins tre, online, tablet. Those ware the retailer sthat won in those categories. I thinkt ehe same will be true now.
More cash sales int eh mortgage market – what’s important is you think about what cousmers are using their cash for. MOrtgaage apps have been down, and maybe . 35% of homes have been cash sales, so peoepla re conserving therir resources for different purchases. This does reflect on retailers – as people are moign in renovnating, purshising new spliances, furntiures. We’re seen theat ickup in those areas.
I think there is merti in the view that peoepl are adjusting their purcashes
How much was weather in early 2014? JACK – personal
NRF Revises Annual Economic Forecast, Expects Stronger Second Half of Year
WASHINGTON, July 23, 2014 – The National Retail Federation today lowered its retail sales forecast for 2014 because of slow growth recorded during the first half of the year, but said sales are expected to grow significantly faster over the next five months. NRF forecasted in January that retail sales would grow 4.1 percent in 2014 over 2013, but today’s revision lowers the forecast to 3.6 percent.
NRF calculated that sales grew 2.9 percent during the first half of the year and are expected to grow at least 3.9 percent during the second half. The numbers include general retail sales and non-store sales, and exclude automobiles, gasoline stations, and restaurants.
“No retailer was immune to the doldrums witnessed during the first quarter, and as a result, the year’s growth trajectory was impacted,” said NRF President and CEO Matthew Shay. “That said, there is plenty of evidence that the second half of the year will be better for the industry as consumers begin to feel more optimistic about their spending decisions.
“And though we maintain realistic expectations of retail sales growth in 2014, we are optimistic that the chances for a stronger economy still exist,” continued Shay.
“The severe weather and other factors we experienced earlier this year have taken their toll on retail, but most of those problems are behind us,” said NRF Chief Economist Jack Kleinhenz. “A second look at our forecast shifted our expectations slightly, but it’s important to note that the outlook is positive. Sales are growing and we expect them to continue at a moderate pace.”??In this month’s Monthly Economic Review, Kleinhenz noted, “…one of the worst winters in recent memory kept shoppers home during the first quarter, and weak numbers for real estate, inventories and exports continued to hamper the economy through the second quarter. However, employment has grown at its strongest pace since 2005, business and consumer confidence have edged higher, manufacturing activity has expanded and inflation pressures remain tame, improving expectations for the second and third quarters.”??The revised forecast was announced as Kleinhenz, Shay and NRF Senior Vice Presidents Bill Thorne and David French held a conference call with reporters this morning on the state of the retail industry to discuss the economy, public policy issues and other topics affecting merchants.
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. www.nrf.com.