The National Retail Federation released its annual forecast in March, and the bottom line? Things are looking up for the sector, and market experts are optimistic.
During this year’s State of Retail & the Consumer virtual conversation, which streamed discussions on the health of consumers and the retail industry in the U.S., retail executives from major brands, economists and consumer experts unveiled NRF’s yearly sales forecast.
First and foremost, NRF predicted that retail sales will grow between 4% and 6% in 2023, with retail sales reaching between $5.13 trillion and $5.23 trillion this year.
The 2023 figure compares with 7% annual growth to $4.9 trillion in 2022. The 2023 forecast is above the pre-pandemic, average annual retail sales growth rate of 3.6%, according to NRF’s press release detailing the event.
“In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” NRF President and CEO Matthew Shay said. “While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels. Retailers are prepared to serve consumers in the current economic environment by offering a range of products at affordable prices with great shopping experiences.”
Non-store and online sales, which are included in the total figure, are expected to grow between 10% and 12% year over year to a range of $1.41 trillion to $1.43 trillion, based on the press release, but it’s nowhere near over for the brick-and-mortar experience.
Although online shopping is still popular among consumers, a significant portion of its growth is attributed to omnichannel sales, which incorporates physical stores in the fulfillment process. As the role of brick-and-mortar stores has evolved in recent years, NRF said they remain the foremost point of purchase for consumers, comprising approximately 70% of all retail sales.
NRF projects full-year growth of around 1%, reflecting a slower economic pace and half of the 2.1% increase from 2022. Inflation is on the way down, based on the release, but will remain between 3% and 3.5% for all goods and services for the year.
As for the labor market, it’s remained resilient, but the trade organization anticipates job growth to decelerate in the near future as a result of slower economic activity and the prospect of restrictive credit conditions. NRF has predicted the unemployment rate will exceed 4% before next year.
NRF Chief Economist Jack Kleinhenz also noted at the webinar that aggregate economic activity has held up well, despite restrictive monetary policy that is working to curb inflation. He also acknowledged that recent developments in the financial markets and banking sector, as well as some unresolved public policy issues, complicate the outlook.
“It’s still too early to know the full effects of the banking industry turmoil, but consumer spending is looking quite good for Q1 2023,” Kleinhenz said. “While we expect consumers to maintain spending, a softer and likely uneven pace is projected for the balance of the year.”
NRF’s calculation of retail sales excludes automobile dealers, gasoline stations and restaurants to focus on core retail.