NRF Calls for 3.1 Percent Growth This Year

Following a slower-than-expected holiday season that came in roughly 25 percent below forecasts, the National Retail Federation is projecting retail sales will continue to creep along in 2016.

The industry trade organization on Wednesday said it expects annual retail sales to rise 3.1 percent this year, which would be flat with its preliminary results of 3.1 percent recorded growth in 2015.

Shoppers carry bags while walking inside the Westfield San Francisco Centre in San Francisco.

David Paul Morris | Bloomberg | Getty Images
Shoppers carry bags while walking inside the Westfield San Francisco Centre in San Francisco.

Though the 2016 forecast is flat with last year’s growth figures, the NRF said a 3.1 percent increase (excluding automobiles, gas stations and restaurants) is above the 10-year average of 2.7 percent growth.

“Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments — particularly in China — we think 2016 will be favorable for growth in the retail industry,” NRF President and CEO Matthew Shay said.

“All of the experts agree that the consumer is in the driver’s seat and steering our economic recovery.”

Jack Kleinhenz, the NRF’s chief economist, said he expects the first half of 2016 will be weaker than the latter six months, thanks to limited first-quarter momentum and inventory levels that remain high.

As retailers continue to work through this excess product, which was largely left over due to the unseasonably warm end to 2015, Kleinhenz said he expects retailers will continue discounting their products to get consumers shopping.

Still, he predicts that as the year progresses, the labor market will continue to improve, payroll growth will pick up and gas prices will remain low — all of which should drive consumer confidence higher.

“The first quarter has been especially weak for the last three years,” Kleinhenz said.

Indeed, NRF predicted last February that full-year sales would increase 4.1 percent compared to 2014. But in July, the group lowered its forecast to 3.5 percent growth, citing unexpected slowness in the first quarter.

It attributed the industry’s underperformance to cold and snowy weather, a backlog of deliveries due to conflict at the West Coast ports and a stronger U.S. dollar. At that time, the group said sales had increased 2.9 percent during the first half.

According to NRF, during the critical months of November and December, sales rose 3 percent to $626.1 billion, falling short of its forecast for 3.7 percent growth during the period. The organization attributed the shortfall to unseasonably warm weather and deflationary prices.

Early holiday-quarter reports from individual retailers have been mixed. While Coach, Michael Kors and Under Armour all reported better-than-expected results, Kohl’s last week slashed its 2015 profit forecast. And last month, Macy’s lowered its guidance for the second time in two months.

“The economy had a bumpy ride in 2015 with fits and starts along the way,” Kleinhenz, said.

“Despite the volatility, the economy continued to reduce unemployment, raise wages and actually increase real GDP by 2.4 percent. Lower gas prices are creating more discretionary income to save, pay down debt, and spend on travel, eating out and personal services.”



The Year of the Goat is a hot topic among retailers and those who celebrate the Chinese New Year. Experts in Chinese astrology say that the outlook for finance and wealth is favorable but exercise caution as there will continue to be volatile political situations causing economic activity and prices to fluctuate.

The indicators outlined in February’s Monthly Economic Review suggest the same outlook. The economy is recovering but continues to be characterized by fits and starts and highs and lows; while I remain optimistic about overall growth for the retail industry in 2015, recently released economic data have come in weaker than expected — puzzling, as the latter half of 2014 showed rapid growth in several areas.

Retail sales came in January lower than expected, but it remains unclear if it is due to seasonal issues like the weather or weaker consumer demand. Consumer sentiment remains strong but continues to fluctuate, reflecting a skittish American consumer. On the other hand, January registered another solid gain in payrolls, and if the rebound in wages isn’t a one-off wonder, there is much to look forward to.

This month’s full report includes these highlights:

Retail Sales

The extra money coming from lower gas prices may be going toward savings, paying off debt or spending on services rather than retail goods and merchandise.

Retail Sales and Consumer Sentiment

The softening in retail sales and consumer sentiment poses some downside risk for consumer spending in the first quarter of 2015.


E-commerce sales continued to grow but the pace of growth slowed from 3.6 percent in the previous quarter to 2.3 percent in the fourth quarter.

Gross Domestic Product and Unemployment

GDP is expected to increase 2.7 percent in the first quarter of 2015 and the unemployment rate is set to decrease from 5.7 to 5.6 percent.

Housing Market

Attractive mortgage rates and easier credit conditions along with stronger job and income growth are reinforcing expected growth in the housing market in 2015.


As the labor market continues to expand, the unemployment rate should drop, enabling wage growth to slowly begin to increase. Wages should pick up between 2.5 and 3 percent on an annual rate in late 2015 and early 2016.

Retail Jobs and Openings

Total retail employment across all industry segments increased 45,900 to 15.6 million in January. There were 434,000 job openings in the retail industry on the last business day of December.

Personal Income and Spending

The wage and salary component of personal income improved a meager 0.1 percent in December and seems to be at odds with the strong December employment report. Nonetheless, wage growth is stronger than last year and is trending modestly higher despite December’s weak growth.

Chicago Fed National Activity Index

The index is well above zero, indicating the economy is growing above its historical trend; some inflationary pressure in the coming months is expected.