Retail sales could top $4.33 trillion in 2021 as the covid-19 vaccine rollout expands and economy reopens, the National Retail Federation said Wednesday in its annual forecast.
That figure represents sales growth between 6.5% and 8.2%, said Matthew Shay, the federation’s president and chief executive officer. The industry group’s chief economist, Jack Kleinhenz, said that will be the highest sales growth since 2004, when retail sales rose 6.3%.
However, Kleinhenz said the forecast assumes the vaccines will be effective and widely distributed. If they are, the economy will have accelerated growth by midyear, he said.
Online sales, which are included in the projected total, are expected to grow between 18% and 23%, or between $1.14 trillion and $1.19 trillion.
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The forecast does not include sales at car dealerships, gas stations or restaurants.
Shay said there’s pent-up demand for shopping as businesses reopen. And Kleinhenz said consumers are in a good position to spend thanks to factors such as increased household savings, government stimulus funds, rising home prices and low consumer debt.
The National Retail Federation also expects the overall economy to gain between 220,000 and 300,000 jobs a month on average, particularly in the second and third quarters. And despite a slowdown at the end of 2020, “the economy is expected to see its fastest growth in over two decades,” Kleinhenz said.
The federation forecasts real GDP growth this year between 4.5% and 5%.
Kleinhenz noted that in 2020, the pandemic caused a drop in spending on services, which normally account for 70% of consumer spending. But even though households became attached last year to the convenience of shopping online, he sees consumers returning to stores as state and local regulations allow them to reopen.
Ken Perkins, president of market-research firm Retail Metrics LLC, said the National Retail Federation’s projected 2021 sales growth may be overly optimistic. He thinks a range of 4% to 5% is a more realistic estimate.
While Perkins agrees that vaccine distribution will unleash “significant” pent-up demand, he said that spending “will rise sharply in experiential categories that are not captured” in the federation’s sales categories such as travel, hotel bookings, plane tickets, concerts, sporting events, cruises and theme parks.
Perkins also noted that the U.S. economy is still down almost 10 million jobs since this time last year. “These consumers are unlikely to ramp up spending 6% to 8%,” and may even spend less this year, he said.
But Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said the forecast could be seen as either “overly aggressive or modest, depending upon the variables that are still in play.” The vaccine rollouts are cause for optimism, Spieckerman said, along with the pent-up demand for in-store shopping and the potential for more government stimulus payments.
“On the other side, upsets with any of these dynamics could send numbers in the other direction,” she said.
Spieckerman generally sees cause for optimism. “Consumers are ready for positive momentum and will be looking for any excuse to get out and about,” she said.
A bigger concern, in her opinion, will be “plumping up” margins.
Pandemic-induced dips in discretionary spending and consumers’ shift to low-margin categories such as grocery will be hard to correct in the short term, Spieckerman said.
“Consumer confidence must increase for categories like apparel, footwear and jewelry to bounce back,” Spieckerman said. “Some retailers and brands that have shifted to casual wear and basics have fared well, yet a glut of this type of merchandise will water down performance over time.” The National Retail Federation said that since the available data and economic factors are subject to change because of “extenuating circumstances,” it will update its estimates “accordingly.”