"More jobs and more income will result in more spending," said Jack Kleinhenz, the Cleveland-based chief economist for the National Retail Federation. "The economy is in a much better place than even a year ago."
CLEVELAND, Ohio - The National Retail Federation is unabashedly optimistic about this year's retail sales, forecasting that they will grow by "at least 3.7 percent, and potentially as high as 4.2 percent" for the 2017 retail year that started this month.
That's a noticeable improvement over the 3.75 percent increase in 2016, as well as the 3.4 percent growth in 2015.
Those estimates don't include automobiles, gasoline stations or restaurants, but they do include online sales. Online sales broken out by themselves are expected to increase between 8 percent and 12 percent.
National Retail Federation President and CEO Matthew Shay "The economy is on firm ground as we head into 2017 and is expected to build on the momentum we saw late last year," NRF President and CEO Matthew Shay said. "With jobs and income growing and debt relatively low, the fundamentals are in place and the consumer is in the driver's seat.
"But this year is unlike any other - while consumers have strength they haven't had in the past, they will remain hesitant to spend until they have more certainty about policy changes on taxes, trade and other issues being debated in Congress," he said.
"Lawmakers should take note and stand firm against any policies, rules or regulations that would increase the cost of everyday goods for American consumers," he said, in a reference to the border adjustment tax on imports.
Shay, president and CEO of the National Retail Federation, the world's largest retail trade association, said the retail forecast is still not at the rate that everyone would like to see, but it is building slowly and "trending in the right direction."
He pointed to the steady increase in economic momentum during 2016, which started out slowly, but rebounded in the summer and third quarter, before wrapping up with a solid holiday shopping season. Not only did employment increase over the past year, but wages started inching back up as well, he said.
Jack Kleinhenz, Cleveland-based chief economist for the National Retail Federation. Jack Kleinhenz, the Cleveland-based chief economist for the National Retail Federation, pointed out that last month, payroll employment increased by 227,000 jobs, and employment has grown by an average of 183,000 over the past three months. The labor participation rate also moved up, to 62.9 percent.
"More jobs and more income will result in more spending," he said. "The economy is in a much better place than even a year ago."
Among other sunny economic signs:
-- The Consumer Confidence Index has settled down to 111.8 in January, down slightly from the 15-year high of 113.3 it hit in December, but it remains high.
-- That also bodes well in terms of the labor market, he said, citing 5.2 million job openings nationwide.
-- Consumers are using their credit cards and are expected to continue doing so, in another sign of greater consumer confidence, he said.
-- Housing prices are up 5.6 percent year over year, according to Case-Shiller Home Price Index, which also gives consumer households confidence in their ability to spend. He said the outlook for the housing sector was very positive, which could mean strong demand for furniture, construction, and building materials.
Although demand for home improvement, electronics and apparel will remain strong, whether those industries will grow remains unclear because of retailers' power to raise prices has become more difficult, NRF said.
"It is clear that online sales will continue to expand in 2017 and provide growth for the retail industry," Kleinhenz said. "But it is important to realize that virtually major retailer sells online, and many of those sales will be made by discount stores, department stores and other traditional retailers. Retailers sell to consumers however they want to buy, whether it's in-store, online or mobile."
Going forward, NRF expects the economy to gain an average of about 160,000 jobs a month, down slightly from 2016 but still a growing labor market.
It also expects the unemployment rate to drop to 4.6 percent by the end of the year, with economic growth in the range of 1.9 percent to 2.4 percent.
Nevertheless, Shay said that consumers are likely to remain cautious about spending, "until there's greater clarity" on some lingering fiscal issues such as trade, healthcare, and tax reform.
"There are dramatic potential upsides here if things are handled the right way, so we remain very, very optimistic about the potential to get the economy moving forward for the first time in nearly a decade," Shay added.
"We believe that comprehensive, meaningful tax reform is absolutely essential in this country," he said. But he said a the "so-called border adjustment tax [on imported goods] would have the ultimate effect of raising prices for the middle class and working class."
At the end of the NRF presentation, when a journalist asked how retailers felt about operating in an environment where President Trump had just criticized Nordstrom for dropping his daughter Ivanka's clothing line, Shay did not directly comment on the Nordstrom controversy but said: "We've been encouraged all along," because Donald Trump is "a businessman and a retailer."
My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!
-- Donald J. Trump (@realDonaldTrump) February 8, 2017
Shay said Trump is clearly a different kind of chief executive, one who likes communicating directly with people and expressing his opinions. "His instincts are very good," Shay added. "He's very much in touch with the voters in this country."
He said retailers are very much engaged in what's going on with the incoming administration and with Congress. "This is an environment where if you're not at the table, you're on the menu," he said.
"They're optimistic about the potential, for the first time in many years, to see their issues addressed in a way that will create jobs."