The National Retail Federation forecasts that U.S. retail sales will grow this year by between 6 percent and 8 percent to more than $4.86 trillion.
The 2022 projection compares with 14 percent annual growth rate in 2021, the highest growth rate in more than 20 years. This year’s sales forecast is notably above the 10-year, pre-pandemic growth rate of 3.7 percent.
“NRF expects retail sales to increase in 2022, as consumers are ready to spend and have the resources to do so,” NRF president and chief executive officer Matthew Shay said Tuesday during NRF’s annual “State of Retail & the Consumer” virtual event.
“We should see durable growth this year given consumer confidence to continue this expansion, notwithstanding risks related to inflation, COVID-19 and geopolitical threats.”
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NRF forecasts that 2022 retail sales will total between $4.86 trillion and $4.95 trillion. The numbers exclude automobile dealers, gasoline stations and restaurants.
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Non-store and online sales year-over-year, which are included in the total figure, are expected to grow between 11 percent and 13 percent to between $1.17 trillion and $1.19 trillion as consumers continue to utilize e-commerce.
NRF anticipates strong job and wage growth and declining unemployment. The organization projects full-year GDP growth will be slower this year, around 3.5 percent, given the surge of inflation and tightening of monetary policy and less fiscal stimulus.
“Most households have never experienced anything like this level of inflation, and it is expected to remain elevated well into 2023,” said NRF chief economist Jack Kleinhenz. “In addition to inflation, the forces impacting the economy include COVID-19 impacts, international tensions and policy variability.” Inflation hit 7.9 percent last month, a 40-year high.
Kleinhenz added that although a roller-coaster ride of incoming data is expected in the next few months, consumer fundamentals remain strong. Household finances are healthy and job and wage growth should support solid increases in consumer spending for 2022.
While consumers want to and have the ability to spend, Kleinhenz said he expects a shift in spending to more services and experiences, like dining out and traveling. He also cited the risks of a “wage-price spiral” and COVID-19 complicating consumer behavior, if there is a resurgence of cases.
Ellen Zentner, chief U.S. economist at Morgan Stanley, said the first quarter has been tracking “stronger than we thought” and that she sees 4.3 percent GDP growth for 2022 with strong wage growth and job gains. “Our outlook is still fairly constructive, but not without risk,” she said, emphasizing that inflation is going to hurt lower-income consumers disproportionately. Zentner said inflation, if sustained long enough, will lead to consumers more often buying smaller, energy-efficient vehicles, and taking shorter and closer-to-home vacations.
Joel Prakken, chief U.S. economist and co-head of U.S. economics for IHS Markit, said he was more pessimistic, in light of the Russian invasion of Ukraine “implying much higher gas and food prices, slower economic growth.” He trimmed his forecast for GDP growth down to 2.4 percent, well below Zentner’s forecast.
Strong employment and wage growth, strong consumer fundamentals, and the nation transitioning from pandemic to endemic boded well for the economy. “But right now a lot of that has to be thrown aside to contemplate what’s been happening in Eastern Europe,” said Prakken.
Sharon Leite, CEO of The Vitamin Shoppe, said “Consumers do have room on their credit cards to still purchase and they are, as long as they manage these inflationary pressures. I think the consumer will still be out there. We are pretty optimistic because of our focus on health and wellness and people getting out more and doing more. I actually feel pretty optimistic that while there are challenges — gas prices, the supply chain, global crisis — I think we are going to have a good year.”
John Furner, president and CEO of Walmart U.S., predicted that this year, there is the potential of more at-home living. “While we may see a lighter phase of the pandemic, we could see people spending more time at home, and eating (more) at home versus eating out.
“We still see a consumer with a strong balance sheet, strong demand and in many cases unfilled demand,” said Furner. “We will be working over the next few quarters to keep costs down.”