Retail sales growth in 2014 is expected to be lower than anticipated in the U.S., according to an updated forecast by the National Retail Federation, which blamed the weakness on severe winter weather.
The association now estimates 2014 retail sales will increase 3.6%, down from the January forecast of 4.1% growth. Growth this year is expected to accelerate in the back half of the year, as the NRF says consumers will begin to feel more optimistic about their spending decisions. The NRF estimated that sales in the first half of the year grew 2.9%. The updated projection from NRF comes after the group earlier this month projected that overall back-to-school sales would slip just a bit to $26.5 billion compared to last year.
“A second look at our forecast shifted our expectations slightly, but it’s important to note that the outlook is positive,” said NRF Chief Economist Jack Kleinhenz. “Sales are growing and we expect them to continue at a moderate pace.”
In a conference call with members of the media, the association suggested that because consumers are buying big-ticket items, like homes and automobiles, there might not be as much money left over for other retail categories.
The weather woes earlier this year masked an even bigger issue that many retailers are confronting: traffic has been weak at brick-and-mortar locations. Shoppers are increasingly making their purchases online, and many analysts say brick-and-mortar retailers will continue to lose market share to online purveyors. Research and advisory firm Forrester Research said U.S. online retail sales accounted for almost 9% of the $3.2 trillion total U.S. retail sales last year, and is expected to grow at a compound annual growth rate of nearly 10% through 2018. That growth will easily outpace the performance at physical stores, which generally mirrors gross domestic product growth.
Kleinhenz expects sales growth this year will be stronger for retailer’s e-commerce operations.
The NRF’s estimates exclude automobiles, gasoline stations and restaurants. The auto sector, which NRF does not track, has been a bright spot in the retail sector as consumers replace their aged vehicles. The Commerce Department earlier this month reported retail and food services sales rose 3.6% in the first six months of 2014, with that growth boosted by the auto industry and strong health and personal care store sales growth. The building material and garden equipment retailers also performed well.