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US Retail Group Forecasts Sales Growth To Slow in an Uncertain Year

National Retail Federation Warns of Repercussions of Rising Inflation, Ukraine War and Gas Prices

Photo Courtesy of Nuthawut.

U.S. retail sales in 2022 won't keep pace with last year as spiraling inflation and the Ukraine war cloud the outlook, according to the National Retail Federation.

The Washington, D.C.-based group, the world’s largest retail trade association, on Tuesday released its annual forecast, predicting sales will rise 6% to 8% this year to between $4.86 trillion and $4.95 trillion. The 2022 estimate compares with last year's record of a 14% sales increase, the highest growth rate in more than two decades, in the year after the peak of the pandemic.

Nonstore and online sales year over year, which are included in the total figure, are expected to grow 11% to 13%, or $1.17 trillion to $1.19 trillion, as consumers continue to use e-commerce. The NRF's outlook — excluding car dealers, gas stations and restaurants — was given by NRF President and CEO Matthew Shay during the group's "State of Retail & the Consumer" virtual event.

Several economists, analysts and retailers — including NRF Chairman and Walmart U.S. President and CEO John Furner — took part in the discussion, conducted almost exactly two years after coronavirus-related shutdowns began, about what the "new normal" is for consumers, how their spending may be curbed by inflation and rising gasoline prices, and the repercussions of Russia's invasion of Ukraine.

"There are clearly many areas where challenges remain," NRF President and CEO Matthew Shay said. "Those headwinds won't go away overnight. But we expect to see durable and enduring economic growth during the rest of this year. We've seen tremendous recovery from the depths of the pandemic, rapid recovery, that no one predicted."

Shay referenced last year's 14% sales growth, which he said culminated in a record holiday season.

"I think we also recognize that this pace of growth and expansion isn't sustainable, and it may not even be healthy," he said. "But we do expect growth ahead this year."

More Spending on Services

The NRF anticipates strong job and wage growth and declining unemployment, said the group's chief economist Jack Kleinhenz. The organization also projects that full-year gross domestic product growth will be slower this year, around 3.5%, because of the surge of inflation and tightening of monetary policy and less fiscal stimulus.

While the NRF said it expects retail sales to remain strong as the economy opens further in the coming months, it will be monitoring the situation closely. Kleinhenz expects inflation to remain elevated well into 2023. And with war raging in Ukraine, "we will likely see some resetting of the world economy," he said

"We expect spending on both goods and services to moderate at a 3% rate or so, also adjusted for inflation," the economist said. "Consumers do want to spend, and do have the ability to spend, though we expect there will be a shift back to services from goods."

Kleinhenz added that although a roller-coaster ride of incoming data is expected in the next few months, consumer fundamentals remain in place. Household finances are healthy, and strong job and wage growth should support solid growth for consumer spending this year, according to Kleinhenz.

Furner acknowledged that Walmart was forced to be "scrappy" and quickly pivot, innovate and adapt during the height of the pandemic.

"In almost every scenario we took progress over perfection," Furner said. "The focus now is all about execution. ... We've got a lot of work to do this year."

He added that last week he gathered and met with his managers for the first time in over two years.

The retail environment has changed forever, but Furner said he wasn't sure how it will ultimately shake out.

"There will be a new normal that will be slightly different," he said.

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