The National Retail Federation substantially boosted its full-year forecast to a 10.5% to 13.5% increase in sales, the fastest growth in nearly 40 years, signaling that more shoppers could return to brick-and-mortar stores in coming months across the United States.
That shakes out to roughly $4.44 trillion to $4.56 trillion, Jack Kleinhenz, chief economist of the industry’s largest trade group, said at a virtual event where it cited an “overabundance of spending power” among Americans. Pricing pressures are slowly beginning to weigh on consumer confidence, but Kleinhenz said the “historic stockpile of savings has a real potential” to kick spending into high gear.
“We’re anticipating the fastest growth we’ve seen in this country since 1984,” he said.
That puts retailers and landlords on notice that shopping centers and malls are likely to be jampacked this summer as the COVID-19 pandemic lessens its grip on U.S. consumers. As of Wednesday, nearly 52% of Americans have received at least one vaccination against the coronavirus, according to the Centers for Disease Control and Prevention.
The increase of vaccinations has led to greater numbers of consumers shaking off nearly 16 months of hunkering down at home, or close to it, by venturing out to shop, eat and experience life in public again.
How well that plays out remains to be seen. There are major cities, for example, that have not fully lifted safety mandates and where consumers are still weary of being out and about. Foot traffic counts at U.S. stores clocked in 43.2% higher for the week beginning May 10 than a year earlier, according to Placer.ai, the analytics firm. That’s strong growth, but still down 5.6% from the same time in 2019.
Based on results like that, coupled with its own experiences, Simon Property Group, the nation’s largest owner of shopping centers and malls, has offered up a cautious outlook on its overall forecast for the year.
“We continue to be conservative because between being cooped up, between being locked down, between the stimulus, between celebrating that we are — the country is still around, and we’re still going to try to get back to normal, there’s clearly some level of euphoria around that,” CEO David Simon said on last month’s conference call. He added that “it would be impossible for me to tell you what percent that is" and that "we’re still seeing pockets of the country that haven’t really seen that [comeback] yet.”
NRF, which represents a big chunk of the nation’s 4.2 million retail establishments, already had a very bullish outlook on consumer spending this year. In February, it projected annual sales would reach $4.02 trillion, up by at least 6.5% and as much as 8.2% to $4.33 trillion. But Kleinhenz said both fiscal and monetary policy interventions this year has helped power the momentum generated by pent-up demand.
“Households are poised to emerge from the pandemic by leaping the curb and returning to some degree of normalcy in living, working and playing,” he said.
The forecast includes in-store, e-commerce and nonstore sales, and it excludes auto, gas station and restaurant sales. Online and nonstore sales are expected to surge from 18% to 23%, or to a range of $1.09 trillion to $1.13 trillion.
Indicators are pointing to an “energetic expansion” in the coming months, leading NRF to also boost its expectations for gross domestic product growth, Kleinhenz said. With pre-pandemic levels of output expected to return in the third quarter, he now sees GDP growth approaching 7%, considerably higher than the 4.4% to 5% forecast he made in February when uncertainty still reigned.
“We are seeing clear signs of a strong and resilient economy,” he said. What’s unknown, he said, is how that spending might shift from, say, grocery and electronic devices to dining and entertainment.
“There likely will be some shifting of spending away from goods toward services, but the retail industry has really benefited from this acceleration of spending,” he said.