In the latest sign that the national economy is improving, the National Retail Federation this month predicted that consumer spending will rise by more than 4% this year.
That’s significant because consumer spending — which means people buying the products and services they need — is the driving force behind the US economy, representing about two-thirds of all economic activity.
Third Consecutive Year of Growth
The predicted 4.1% increase in consumer spending during 2014 comes on the heels of a 3.7% increase in 2013. And the boost in e-commerce spending will be even higher, increasing an estimated 9% to 12%, according to the NRF’s forecast.
That’s good news for the nation’s manufacturers because it will mean a higher demand for products, according to NRF president and CEO Matthew Shay.
“Measured improvements in economic growth combined with positive expectations for continued consumer spending will put the retail industry in a relatively good place in 2014,” Shay said. “Though headwinds in the form of the looming debt ceiling debates, increased health care costs, and regulatory concerns still pose risk for both consumers and retailers, we are cautiously optimistic and hopeful that the economic tides will change in 2014.”
Leading the way were anticipated continued increases in spending on mobile technology such as smart phones, tablets and other devices.
Prediction Based on Many Factors
The NRF’s optimism was spurred by a number of factors, including:
- Economic growth that is expected to exceed its historical long-term average. Early estimates for grwoth in the Gross Domestic Product could be at the fastest pace they have been since 2011.
- About 185,000 new jobs are expected to be added each month, a modest growth that will help decrease the unemployment rate to 6.5% or lower by the end of the year.
- The Consumer Price Index, which is an indicator of inflation, could reach 1.7% during 2014.
- The housing is expected to continue to show improvements, and with new homes comes more spending on products to fill those houses.
Weather, Global Financial Issues
That good economic news is tempered by caution about non-economic factors, including the harsh winter the entire nation has been experiencing as well as the ever-present threat of more global financial issues, said Shay.
“Based on same-store comparable numbers, it is pretty clear that the severe weather that impacted many parts of the country had an impact on sales, as well as aggressive promotion and discounting that took place throughout the entire holiday season. From Black Friday forward,we knew things would be promotional, with a great deal of opportunities to take advantage of promotions.”
NRF chief economist Jack Kleinhenz said that while those risks are always present, there is still much room for optimism.
“While we are careful not to ignore the challenges, we are optimistic and hopeful that the future disruptions will be limited, allowing employment and business investment to grow all the while giving retailers and their customers the confidence in the economy they need.”
Kleinhelz added that the three-month moving average for retail sales for October through December of 2013 was 3% higher than the same period for 2012 and 3.8% higher than 2011.
The NRF retail sales predictions is for consumer products and excludes spending on automobiles, gas stations and restaurants.