Consumers are expected to ramp up their spending despite uncertainties stemming from the deadly coronavirus outbreak as well as the lingering trade war and uncertainties surrounding upcoming presidential election.
According to the National Retail Federation, retail sales in 2020 are predicted to increase between 3.5% and 4.1% to more than $3.9 trillion, assuming that the coronavirus does not become a global pandemic. So far this year, Americans have recorded gains in household income and wealth, and they have experienced lower interest rates that have contributed to robust consumer confidence.
“The nation’s record-long economic expansion is continuing, and consumers remain the drivers of that expansion,” NRF president and CEO Matthew Shay said in a statement. “There are always wild cards we cannot control like coronavirus and a politically charged election year, but when it comes to the fundamentals, our economy is sound and consumers continue to lead the way.”
The forecast comes as retailers face challenges abroad with the spread of the illness, which has stymied production in China and led many companies to either shutter their doors or reduce operating hours in the region. The NRF added that retail sales and business confidence could be impacted if factory closures in China persist.
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Many firms also continue to keep a close eye on developments in President Donald Trump’s ongoing tariff dispute with China. In mid-January, the world’s two largest economies inked a so-called “phase one” deal that addressed intellectual property protection and China’s increased purchase of U.S. goods. NRF chief economist Jack Kleinhenz noted that corporate CEOs remain cautious over trade policy and worry that an escalating trade war could discourage corporate investments.
In its report, the organization added expectations for U.S. employers to gain between 150,000 and 170,000 jobs per month this year, compared with an average 175,000 in 2019. It also predicts unemployment will remain around 3.5%, prolonging a half-century low.
“The economy is growing at a more modest pace, but the underlying economic fundamentals remain in place and are positive,” Kleinhenz said. “Consumers remain upbeat and have the confidence to spend, and the steady wage growth that has come with the strong job market is fueling their spending. The state of the consumer is very healthy.”
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