Buoyed by a strong economy and healthy consumer confidence, 2018 retail sales are expected to grow 4.5 percent year over year, according to the National Retail Federation.
In February, the trade organization predicted a more modest growth rate of 3.8 to 4.4 percent, but it upgraded its outlook on Monday, thanks in part to the increase in consumer spending through the second and third quarter of the year. That acceleration is being driven by the tight labor market, higher wages for some workers and the tax reform package from the administration of President Donald Trump.
For the first half of the year, it said, retail sales grew 4.8 percent over the same period in 2017, despite a sluggish January. The NRF’s calculations exclude automobiles, gasoline stations and restaurants.
The sector’s rebound has been apparent on Wall Street, too, with Macy’s stock up 60 percent this year, Nordstrom’s trading near its 52-week high of $54.61 and retail ETFs reaching record levels.
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Still, the NRF cautions that the looming threat of tariffs could put a damper on retail’s gains if Trump’s trade war continues apace. $34 billion in Chinese goods were hit with 25 percent tariffs that took effect in July, and another $16 billion are set to be targeted this month. The president has also warned China that he’s prepared to levy duties on an additional $200 million in goods, including many consumer products, if it continues to retaliate with tariffs of its own.
“We don’t want to see these economic gains derailed by protectionist trade policy,” said NRF president and CEO Matthew Shay. “With retailers ramping up imports and stocking their warehouses before most of the proposed tariffs will take effect, an immediate impact on prices on consumer goods is unlikely, but that won’t last for long. And just the mere talk of tariffs negatively impacts consumer and business confidence, leading to a decline in spending. It’s time to replace tariffs and talk of trade wars with diplomacy and policies that strengthen recent gains, not kill them.”
The U.S. Census Bureau is expected to release its monthly retail sales data for July on Wednesday.