Despite inflationary pressures, the banking crisis and other macro-economic issues that are impacting consumer spending, the National Retail Federation is expecting sales to grow between 4% and 6% in 2023. This translates into $5.13 trillion to $5.23 trillion and does not include automobile dealerships, gasoline stations or restaurants.
Although relatively bullish, the projection is lower than the 7% gain to $4.9 trillion that retailers notched last year as the world shook off the worst of the pandemic. But it’s higher than the 3.6% average annual growth rate from 2010 and 2019, said Jack Kleinhenz, NRF’s chief economist.
“While it is still too early to know the full effects of the banking industry turmoil, consumer spending is looking quite good for the first quarter of 2023,” he said. “While we expect consumers to maintain spending, a softer and likely uneven pace is projected for the balance of the year.”
In total, non-store and online sales are expected to grow between 10% and 12% year-over-year to a range of $1.41 trillion to $1.43 trillion. Although omnichannel has become the option of choice for most shoppers, brick-and-mortar stores still account for about 70% of total retail sales.
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For the economy as a whole, the NRF projected full-year GDP growth of around 1%, reflecting a slower economic pace and half of the 2.1% increase in 2022. Inflation is continuing to drop, but is expected to remain at between 3% and 3.5% this year.
The price increases will be felt most sharply among lower-income consumers, who will focus the majority of their spending on necessities. Many of these shoppers are trading down in brand and price and focusing more on sales to stretch their household budgets, said Matthew Shay, president and chief executive officer of NRF.
For higher-income consumers, areas such as travel and dining are expected to account for much of their spending.
Turning to jobs, the NRF said that slower economic activity and more-restrictive credit conditions are expected to result in a deceleration in job growth in the coming months. The group projected that the unemployment rate is likely to exceed 4% before 2024.
“In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards,” said Shay. “While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels. Retailers are prepared to serve consumers in the current economic environment by offering a range of products at affordable prices with great shopping experiences.”
The Washington-based organization unveiled its sales projection during the third annual State of Retail & the Consumer webinar on Wednesday.
The hour-long presentation bought together an eclectic group of economists, analysts and retailers including Anushka Salinas, president and chief executive officer of Rent the Runway. She said that while the higher-income consumer her business targets is less impacted by economic shifts, they too have become more cost-conscious and selective about how they spend their money.
Haio Barbeito, president and CEO of Old Navy, agreed that the consumer was looking for value and is shopping more strategically these days, buying what they need, not what they want. “Value is the name of the moment.”
